Pegging India’s GDP growth at 7.2 per cent in 2017-18 on account of reforms, domestic consumption, and improvement in trade, the World Bank on Monday said that there were signs of a slowdown in early part of last fiscal but a favourable monsoon lifted the economy before being temporarily hit due to demonetisation.
“India remains the fastest growing economy in the world and it will get a big boost from its approach to GST which will reduce the cost of doing business for firms, reduce logistics costs of moving goods across states, while ensuring no loss in equity,” said Junaid Ahmad, World Bank country director in India, adding that overall the impact of GST on equity and poverty is likely to be positive.
Ahmad also said that as a result of the immediate cash crunch on account of demonetisation, a modest slowdown is expected in GDP growth in 2016-17 to 6.8 per cent. “Growth is expected to recover in 2017-18 to 7.2 per cent and is projected to gradually increase to 7.7 per cent in 2019-20,” the World Bank said in its May 2017 India Development Update report, which was released on Monday.
However, the report said that there are significant risks for India’s growth outlook on the back of uncertain global environment, including the rising protectionism, as well as slowing Chinese economy that may hamper external demand.
Private investment is lagging due to “corporate debt overhang” and financial sector is stressed with high levels of non-performing assets (NPAs) of the banks, it said, adding that subdued private investment would put downside pressure on India’s potential growth, besides a rapid increase in global oil and commodity prices.
The agency also highlighted the need to address the lower participation of female labour force in India. “According to an assessment done by the World Bank, India’s potential GDP growth can go up by a full percentage point if half the gap in female labour force participation rate with Bangladesh or Indonesia, is closed,” it said.
As per the report, India has one of the lowest female participation rates in the world, ranking 120th among the 131 countries, for which data is available. Even among countries with similar income levels, India is at the bottom, together with Yemen, Pakistan and Egypt.
“Worse still, the rate has been declining since 2005. This is a matter of concern as women’s paid employment is known to increase their ability to influence decision-making within the household, and empower them more broadly in society as a whole,” the report said.