While the World bank has reduced its India GDP growth forecast to 7% for 2017-18 from 7.2%, IMF has scaled down India’s growth forecast to 6.7% from 7.2%.
After the Asian Development Bank and the Organisation for Economic Cooperation and Development (OECD), India’s GDP forecast for the year 2017-18 has now been downgraded by two of the world’s biggest financial institutions – the International Monetary Fund (IMF) and the World Bank.
While the World bank has reduced its India GDP growth forecast to 7% for 2017-18 from 7.2%, IMF has scaled down India’s growth forecast to 6.7% from 7.2%. Both the International Financial institution have attributed India’s economic slowdown, at least partly, to demonetisation and the implementation of Goods and Services Tax (GST).
“The growth projection for 2017-18 has been revised down to 6.7 per cent, reflecting still lingering disruptions associated with the currency exchange initiative introduced in November 2016, as well as transition costs related to the launch of the GST in July 2017,” IMF said in its ‘World Economic Outlook’ report, released ahead of its annual meet with the World Bank.
The World Bank’s biannual economic update, South Asia Economic Focus Fall 2017, also echoed similar views on India. “India’s economic momentum has been affected by disruptions from the withdrawal of banknotes and uncertainties around the Goods and Services Tax (GST),” the report said.
The World Bank report also said that the top spot for fastest growing economy in South Asia and the fastest growing big economy has gone back from India to China.
However, both the institutions have predicted a better growth prospect for India in the future.
“Activity is expected to stabilise within a quarter – maintaining the annual GDP growth at 7.0 per cent in FY2018. Growth is projected to increase gradually to 7.4 per cent by FY2020, underpinned by a recovery in private investments,” the World Bank report said.
Economic Counsellor and Director of Research Department of the IMF, Maurice Obstfeld has said that the downgrade for this year looks like a blip in a much positive longer-term picture.
Last week the World Bank President had termed the slowdown in the Indian economy as “aberration” saying that the deceleration in the first quarter was mostly due to temporary disruptions in the preparation for the GST.
But the World Bank, in its report, also warned that the subdued private investment due to internal bottlenecks could put downside pressure on the country’s potential growth.