Washington, December 12: United Nations (UN) in its report stated that India's GDP growth remains fastest and is projected to progress by 7.4% in fiscal 2019. The report said, the nation is to benefit from strong private consumption, public investment and gradual reforms undertaken by the government.
"Monetary policy stances are moderately accommodative while fiscal policies in several economies maintain a strong emphasis on infrastructure investment. The recovery of external demand is also buttressing growth," said the report unveiled today.
On India, the report has projected a positive outlook despite the slowdown early this year and the lingering effects of demonetisation.
"The outlook for India remains largely positive, underpinned by robust private consumption and public investment as well as ongoing structural reforms. Hence, GDP growth is projected to accelerate from 6.7 per cent in 2017 to 7.2 per cent in 2018 and 7.4 per cent in 2019," the UN DESA report said.
But the anaemic performance of private investment remains a key macroeconomic concern for India with gross fixed capital formation, as a share of GDP, falling to 30 per cent in 2017, from 40 per cent in 2010.
The credit is subdued and there is low capacity utilisation in some industrial sectors while the banking and corporate sectors feel the balancesheet problems.
"In this environment, vigorous public investment in infrastructure has been critical in propping up overall investment growth," the report said.
Credit growth is subdued despite monetary easing, but bank recapitalisation and the Indian Bankruptcy Code (IBC) have the potential to revive credit growth, said N R Bhanumurthy, Professor, National Institute of Public Finance and Policy.
Strengthening its fiscal accounts, especially through widening of the tax base, and addressing infrastructure deficit are two major concerns for the Indian government, he added.
Achieving the Fiscal Responsibility and Budget Management (FRBM) target could become a major challenge in the context of Goods and Services Tax (GST) as well as recent stimulus measures, he added.
"Achieving 3.2 per cent fiscal deficit may not be an issue, but quality of expenditure is more important than fiscal deficit target," Bhanumurthy told reporters while presenting the report here.
For South Asia, the UN report expects regional gross domestic product (GDP) growth to be strengthening to 6.5 per cent in 2018 and further to 7 per cent in 2019, following an estimated economic expansion of 6.3 per cent this calender.
The positive economic outlook is widespread across the region, with most of the economies projected to see stronger growth rates in 2018 compared to 2017, it added.
Inflation in the region is seen to be stable and at relatively low levels, stated the report.
"The favourable prospects for inflation, coupled with mostly sustainable current account deficits, will facilitate macroeconomic policy management across the region in the near term," the report added.
PM Modi, who is under fire for fall in GDP, said in October that it isn't the first that India's growth had slipped to 5.7%. Talking about revival in GDP, Modi said, "But it is also a fact that the government is committed and capable of reversing this trend. We are ready to take decisions."
Meanwhile, Morgan Stanley, a leading global financial services firm expects India's GDP to grow from 7.5% in 2019 to 7.7% by 2020. "We are confident that a recovery in private capex will be underway in 2018, for the first time in six years," a report by the firm stated, adding that the headline CPI inflation might rise to 4.6% in 2019 from 3.4% in 2018. At present, India's GDP growth rate is 7.1%.