The World Bank on Wednesday predicted India’s Gross Domestic Product would grow at 7.3% in 2018-’19 and 7.5% in 2019-’20. The bank’s report – India Development Update: India’s Growth Story – attributed the growth to a stabilising economy post demonetisation and the roll out of the Goods and Services Tax.
The Narendra Modi government had scrapped currency notes of Rs 500 and Rs 1,000 denomination in November 2016, which led to a significant disruption in economic activity in India. Subsequently, growth for the first quarter of 2017-’18 fell to 5.7%. The government then rolled out the GST from July 1, 2017, which, due to its complex nature and technical glitches, came as another jolt to the economy. However, growth recovered to 6.3% in the second quarter of the fiscal, and 7.2% in the third.
However, the World Bank said India would need to boost its private investments and exports, as well as improve credit growth. It added that the country needed to make progress on the “unfinished reform agenda” if it wished to sustain higher GDP growth rates.
The report said that “maintaining hard-won macroeconomic stability, providing a definite and durable solution to the cleaning up of banks’ balancesheets, realising GST’s growth and fiscal dividend, and regaining momentum on the unfinished structural reform agenda” would be key to India achieving growth rates over 8% after 2019-’20.
The World Bank said that India would need to grow at over 8% for several decades if it was to attain middle class status by 2047. The bank’s report said that for such growth to be realised, India must focus on more inclusive growth, and enhance the effectiveness of its public sector.