India standing bright in global economy; ADB projects 7.3% growth in 2018, 7.6% by 2019
Manila, April 11: The Asian Development Bank (ADB) has predicted that India's growth trajectory would rise from 7.3% in 2018 to 7.6% by 2019. The agency attributed the growth projected in its Asian Development Outlook to the fortification of the Indian banking system and benefits of GST.
“Also set to catalyse growth are benefits from the GST as it mitigates geographic fragmentation and adds revenue to the exchequer, as well as further progress on fiscal consolidation and reform to promote FDI,” it said.
ADB Chief Economist Yasuyuki Sawada said, despite the short-term costs, the benefits of reform such as the recently implemented GST will propel India's future growth.
Sawada said Robust foreign direct investment flows attracted by liberalised regulations and the government steps to improve the ease of doing business will further bolster growth.
Inflation is expected to inch up to 4.6% in FY2018 and 5.0% in FY2019 driven by further firming of global commodity prices and strengthening of domestic demand. The uptick in inflation along with deferment of fiscal consolidation and expected hikes in the US Federal Reserve’s interest rate has reduced the room for policy rate cuts to stimulate growth.
A pickup in growth in advanced economies will likely help exports to grow at a healthy rate. At the same time, imports are also expected to increase as a result of higher commodity prices and the uptick in domestic demand. With the rise in imports offsetting the increase in exports, the current account deficit is expected to widen a bit to 2.2% of GDP in FY2018 and 2.4% of GDP in FY2019. The current account deficit is expected to be financed comfortably by capital flows, as India remains an attractive destination for foreign direct investment and portfolio flows.