India’s Gross Domestic Product (GDP) is expected to grow by 6.7 percent in FY 2017-18 and will pick up to 7.3 percent in 2018-19, and to 7.5 percent a year in the medium term, a report released by the World Bank on Wednesday stated.
The report titled ‘Global Economic Prospects’ for 2018 noted that the GDP figures of 6.7 percent for FY 2017-18 can be attributed to short-term disruptions arising from the introduction of the Goods and Services Tax (GST).
“Strong private consumption and services are expected to continue to support economic activity, while private investment is expected to revive as the corporate sector adjusts to the GST; infrastructure spending increases, partly to improve public services and internet connectivity; and private sector balance sheet weaknesses are mitigated with the help of the efforts of the government and the Reserve Bank of India (RBI),” the report read.
The World Bank noted that over the medium term, the GST is expected to benefit economic activity and fiscal sustainability by reducing the cost of complying with multiple state tax systems, drawing informal activity into the formal sector, and expanding the tax base.
It also takes cognisance of the recent recapitalisation package announced for public sector banks by the Prime Minister Narendra Modi-government, which is expected to help resolve banking sector balance sheets, support credit to the private sector, and lift investment. Further, trade recovery at a global level is expected to lift exports, it claimed.