World Bank cuts India’s FY17 growth forecast to 7%
The World Bank has lowered its growth forecast for India to 7 per cent from 7.6 per cent in 2016-17, citing a slowdown in consumption and manufacturing due to demonetisation and an ongoing decline in private investment and credit constraints due to impaired bank balance sheets.
The World Bank’s Global Economic Prospects January 2017 report added that the Indian economy is subsequently set to recover its growth momentum, with growth rising to 7.6 per cent in FY18 and further strengthening to 7.8 per cent in FY20.
“Unexpected ‘demonetization’— the phasing out of large-denomination currency notes which were subsequently replaced with new ones—weighed on growth in the third quarter of FY2017,” the report added. “Weak industrial production and manufacturing and services purchasing managers’ indexes (PMI), further suggest a set back to activity in the fourth quarter of FY2017.”
This was further accentuated by other economic factors, the report added, leading to a slump in the entire year’s growth rate.
“A retrenchment of private investment, reflecting excess capacity, corporate deleveraging, and credit constraints due to impaired commercial banks’ balance sheets, also had an adverse effect on activity,” according to the report. “For the whole of FY2017, growth is expected to decelerate to a still robust 7.0 per cent.”
The report, however, noted that four key reforms in India in 2016 could help growth rebound.
These, it said, were the passage of the bankruptcy and insolvency code, the liberalisation of FDI norms across sectors, the passage of the Goods and Services Tax (GST) Amendment Bill, and the agreement between the government and the Reserve Bank of India on a monetary policy framework that includes setting up a monetary policy committee and agreeing on a flexible inflation target.
“Various reform initiatives are expected to unlock domestic supply bottlenecks and raise productivity,” according to the report. “Infrastructure spending should improve the business climate and attract investment in the near-term. The ‘Make in India’ campaign may support India’s manufacturing sector, backed by domestic demand and further regulatory reforms.”
“Moderate inflation and a civil service pay hike should support real incomes and consumption, assisted by bumper harvests after favorable monsoon rains. A benefit of ‘demonetization’ in the medium term may be liquidity expansion in the banking system, helping to lower lending rates and lift economic activity.”
Demonetisation could still cause major problems in the short term, slowing reforms and affecting smaller economies dependant on the Indian economy, according to the World Bank.
“In the short-term, ‘demonetization’ could continue to disrupt business and household economic activities, weighing on growth,” according to the report. “Further, the challenges encountered in phasing out large currency notes and replacing them with new ones may pose risks to the pace of other economic reforms (e.g., Goods and Services Tax, labor, and land reforms).”
The report added that the demonetisation effect on trade and remittance channels could also affect growth rates in smaller economies such as Nepal and Bhutan.
- star FILM REVIEW: फिल्म देखने से पहले पढ़ें कैसी है 'ओके जानू'
- star The Chainsmokers Reveal New Single 'Paris' Release Date
- star Dangal becomes the most grossing Indian film ever, replaces PK
- star Golden Globes 2017: the complete list of winners
- star Ryan Gosling thanks wife Eva Mendes in heartwarming Golden Globes speech after winning best actor
- Load More...
- star Trump expected to sign executive orders on immigration
- star युपी चुनाव : साइकिल का चुनाव चिन्ह जब्त, चुनाव आयोग ने दिया अपना फैसला
- star Lionel Messi statue vandalised in Buenos Aires
- star World Bank cuts India’s FY17 growth forecast to 7%
- star Amazon removes Indian flag doormat after Sushma Swaraj's stern warning
- Load More...
- star Oscar nominations 2017 announced – see full list
- star Prison Break season 5 extended trailer is going viral all over the inetrnet
- star दंगल की गीता यानी फातिमा साना शेख के जन्मदिन का खास अखाडा केक, यहाँ देखिये तस्वीरे
- star Cristiano Ronaldo beats Lionel Messi to win Fifa best player award
- star Lionel Messi saves Barcelona again with this perfect free kick
- Load More...
- star Makar Sakranti : why it is celebrated and Interesting facts you might not know
- star मिलिए कृतिका पुरोहित से: भारत की पहली नेत्रहीन डॉक्टर
- star #FoodHistory : Where did scrumptious Samosa originate and how we made it Indian ? Find out here
- star जब गावस्कर की धमाकेदार परफॉरमेंस देखकर वेस्ट इंडीज ने बनाया उनके लिए गाना, यहाँ पढ़िए
- star You'll be surprised to know what Mahatma Gandhi suggested as a solution to eve-teasing
- Load More...