India's GDP growth forecast to accelerate to 7.3% in FY 2018/19: World Bank

Domestic demand is strengthening from the benefits of structural reforms and of a revival of credit growth

The World Bank in its January 2019 Global Economic Prospects report released on 08 January 2019 has forecasted India's GDP accelerate to 7.3% in FY2018/19 and 7.5% thereafter, in line with June 2018 forecasts. The GDP growth is showing pick-up from 6.7% increase in FY2017/18. This mainly reflects strengthening domestic demand in India, as the benefits of structural reforms such as GST harmonization and bank recapitalization take effect.

In India, growth has accelerated, driven by an upswing in consumption, and investment growth has firmed as the effects of temporary factors wane. However, rising interest rates and currency volatility are weighing on activity.

Private consumption is projected to remain robust and investment growth is expected to continue as the benefits of recent policy reforms begin to materialize and credit rebounds. Strong domestic demand is envisioned to widen the current account deficit to 2.6% of GDP next year. Inflation is projected to rise somewhat above the midpoint of the Reserve Bank of India's target range of 2 to 6%, mainly owing to energy and food prices.

The World Bank report also pointed out that current growth projections suggest that the number of extreme poor should continue to fall rapidly in India.

In India, the government deficit was higher than planned, reflecting lower-than-expected revenues from telecom spectrum auctions and low dividends from public sector enterprises. The central government is budgeting a reduction in the fiscal deficit for next fiscal year.

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