ADB Says India on Track to Grow 7.4%

The Manila-based Asian Development Bank said on Thursday that India is expected to achieve its previous growth projections of 7.4% in 2017 and 7.6% in 2018, largely driven by strong consumption.

In a supplement to its Asian Development Outlook 2017 report, the ADB upgraded its growth outlook in Asia from 5.7% to 5.9% for 2017 and from 5.7% to 5.8% for 2018. The smaller uptick in the 2018 rate reflects a cautious view on the sustainability of this export push, PTI reported.

China, the world’s second largest economy, is now expected to expand by 6.7% in 2017 and 6.4% in 2018, well below India’s rate of expansion.

It said that the implementation of the Goods & Services Tax in India is expected to improve the ease of doing business and facilitate growth in the medium term, though there may be some teething troubles as firms adjust to the new system.

Commenting on the impact of demonetization in the country, ADB said that the economic growth did slow down to 7.1%. It further observed that other factors also discouraged private sector investment and poor bank credit.

The data from the first quarter suggests that the manufacturing sector registered positive growth as the purchasing managers index went up from 51.2 to 51.7.

Predicting growth, ADB added that the increase in consumption is likely to run the engine of growth.

Stating the GST and its impact on the growth rate, ADB said that with the coming of GST, ease of doing business will get a boost, adding to the overall growth rate in the country.

“Higher crop sowing, helped by a healthy monsoon, and an uptick in rural wage growth will bolster rural consumption, while urban consumption will get a boost from pay hikes for central and state government employees,” it said.

ADB said front-loading central government capital expenditure should further propel the pickup in growth in fiscal year 2017. The government had advanced the date of the budget presentation which has helped in spending funds on key projects from the beginning of the financial year in April.

It said growth prospects in developing Asia for 2017 have improved on the back of stronger-than-expected export demand in the first quarter of this year.

Meanwhile, ADB last month committed $10 billion support for infrastructure building and immediate development needs of less-developed states in the country. Besides, it decided to increase the annual funding by $1 billion to $4 billion.