‘GST, demonetisation heightened risks for poor’: World Bank cuts India’s growth rate projection to 6%
Washington (USA) | Jagran News Desk: The World Bank on Sunday said that after a broad-based deceleration in the initial quarters of this fiscal year, India’s growth rate will fall to 6 per cent.
The World Bank, however, said that India’s growth rate will recover to 6.9 per cent in 2021 and 7.2 per cent in 2022.
The World Bank’s report as released ahead of the annual meeting of the World Bank with the International Monetary Fund. The report noted that India's economic growth decelerated for the second consecutive year.
In 2018-19, India’s growth rate stood at 6.8 per cent, down from 7.2 per cent in the 2017-18 financial year.
While industrial output growth increased to 6.9 per cent due to a pick-up in manufacturing and construction activities, the growth in agriculture and the services sector moderated to 2.9 and 7.5 per cent, respectively.
“In the first quarter of 2019-20, the economy experienced a significant and broad-based growth deceleration with a sharp decline in private consumption on the demand side and the weakening of growth in both industry and services on the supply side,” the report said.
“Reflecting on the below-trend economic momentum and persistently low food prices, the headline inflation averaged 3.4 per cent in 2018-19 and remained well below the RBI's mid-range target of 4 per cent in the first half of 2019-2020. This allowed the RBI to ease monetary policy via a cumulative 135 basis point cut in the repo rate since January 2019 and shift the policy stance from neutral to accommodative,” the report added.
The report also said disruptions brought about by the introduction of the GST and demonetisation may have heightened the risks for the poorest households.
The report also noted that the current account deficit had widened to 2.1 per cent of the GDP in 2018-19 from 1.8 per cent a year before.
Meanwhile, the report said that the significant capital outflows in the first half of the current year were followed by a sharp reversal from October 2018 onwards and a build-up of international reserves to USD 411.9 billion at the end of the fiscal year.
“The general government deficit is estimated to have widened by 0.2 percentage points to 5.9 per cent of the GDP in 2018-19. This is despite the central government improving its balance by 0.2 percentage points over the previous year. The general government debt remained stable and sustainable - being largely domestic and long term-at around 67 per cent of GDP,” the report said.
“Growth is expected to gradually recover to 6.9 per cent in 2020-21 and 7.2 per cent in 2021-22 as the cycle bottoms-out, rural demand benefits from effects of income support schemes, investment responds to tax incentives and credit growth resumes. However, export growth is expected to remain modest, as trade wars and slow global growth depresses external demand,” the report said.
(With PTI inputs)
Posted By: Aalok Sensharma