India’s economic growth is expected to rise to 7.3 per cent in 2018-19 and further to 7.6 per cent in the next financial year, the highest among Asian economies, on the back of goods and services tax (GST) and banking reforms, according to the Asian Development Bank (ADB). It, however, highlighted the need for coordinated action on skill development, labour regulation, social protection, and income redistribution as new technologies alter the skills required of the workforce and might cause unemployment as some firms downsize or close.
The Indian economy grew 6.6 per cent in the last fiscal due to lingering effects of demonetisation in 2016, businesses adjusting to goods and services tax (GST) in 2017, and a subdued agriculture. The country’s economic growth was 7.1 per cent in 2016-17. With 7.3 per cent growth projected for this fiscal, India would be reversing the two-year declining trend.
“Despite the short-term costs, the benefits of reform such as the recently implemented GST will propel India’s future growth,” ADB Chief Economist Yasuyuki 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, he added.
The ADB said protectionist trade measures by the United States are yet to impact trade flows to and from Asia. “However, further action and retaliation against it (US trade tariffs) could undermine the business and consumer optimism that underlies the regional outlook (for Asia),” it said.
With regard to China, it said the country will slow down from 6.9 per cent in 2017 to 6.6 per cent this year, and 6.4 per cent in 2019. “India would remain the fastest-growing country across Asia,” ADB India Country Director Kenichi Yokoyama said. However, there are issues regarding rising NPAs and risks from crude oil prices rising above $70 a barrel, he said.
He, further, said the impact of the US tariff hikes may not be much, but India needs to be cautious. “The biggest risk factor could be the crude oil price,” Yokoyama said.