India’s Growth Projected to Bounce Back to 7.2% in FY18

With the fading impact of note ban announced by the Modi government in November last year, Asia’s third biggest economy is expected to gain strength, maintaining its tag of the world's fastest growing economy.

International Monetary Fund (IMF), the international organization headquartered in Washington, has projected that the Indian economy will rebound to 7.2 per cent in this current fiscal year and rise to 7.7 per cent in the next, in 2018-2019.

The hurdles caused by demonetisation resulted into the lack of ready cash available with spenders. However, with the government’s remonetisation exercise, this problem is expected to gradually dissipate in 2017.

Other than remonetisation, a good monsoon season and developments in removal of supply-side problems will also help in balancing this disruption.

According to the report, improving productivity in the agriculture sector, which is the most labour-intensive sector and employs nearly half of Indian workers, remains a key challenge. Farmers require more flexibility in distributing and marketing their crops as this will help improve competitiveness, efficiency, and transparency, it added.

Further, a favourable monsoon could put an end to the almost continuous earnings downgrades that the domestic market has been witnessing in the past several quarters. According to the latest prediction of India Meteorological Department (IMD), the monsoon this year could be normal and bring 100 per cent rainfall instead of 96 per cent as predicted earlier.

Looking at the Asia as a whole, the IMF report estimates that the growth will accelerate to 5.5 per cent this year from 5.3 per cent in last fiscal. However, it warned that the near-term outlook for the region is clouded with significant uncertainty, adding that medium-term growth faced difficulties from a slowdown in productivity growth in both advanced economies and China.

Going forward, on the back of reforms initiatives being taken by the government, India’s growth rate will improve further. Stronger consumption and fiscal reforms are expected to improve business confidence and investment confidence in the country.

Latin Manharlal Group