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WB: India Recovers From Demonetization Impact

Demonetized currencyDemonetized currency

The World Bank has said that the Indian economy has recovered from the adverse effects of the demonetization and implementation of Goods and Services Tax.

According to World Bank projections, the Indian economy is now expected to grow by 7.3% in 2018 and 7.5% in 2019. However, despite the recovery, job creation still remains a concern, PTI reported.

India’s recovery will also yield dividends for the South Asian region, said the World Bank. With India on the upswing, South Asia is set to become the world’s fastest growing region again, with the possibility of widening the lead over East Asia and the Pacific.

India’s recovering economy is expected to drive South Asian growth to 6.9% in 2018, and 7.1% in 2019.

The report projected the country’s growth to further accelerate to 7.5% in 2019-20 and 2020-21 and suggested that New Delhi should strive to accelerate investments and exports to take advantage of the recovery in global growth.

The World Bank’s South Asia Economic Focus report, however, had worrying news for India. The report stated that India’s employment rate was declining owing to women leaving the job market, and that India needed to create 8.1 million jobs annually to maintain its employment rate.

With farming jobs on the decline, jobs are disappearing in areas that are “borderline between urban and rural”.

The International Monetary Fund last month said that the Indian economy now seems to be on its way to recovering from disruptions caused by demonetization and roll-out of GST.

At the same time, the IMF has also underscored the significance of reforms in other key sectors like education, health and improving the efficiency of the banking and financial systems.

Meanwhile, inflation based on wholesale prices in India eased marginally to 2.47% in March on cheaper food articles, especially pulses and vegetables. On the basis of Wholesale Price Index, inflation was 2.48% in February and 5.11% in March last year.

According to a government data released Monday, food articles showed deflation at 0.29% in March as against a 0.88% inflation in the preceding month.

Deflation in vegetables was 2.70%, pulses 20.58% and wheat 1.19% in March. Inflation in ‘fuel and power’ basket however rose to 4.70% in March from 3.81% in the previous month. The inflation data for January was revised upwards to 3.02% from the provisional estimate of 2.84%.

Retail inflation, as per data released last week, slipped to a five-month low of 4.28% in March on account of decline in food prices. In its first monetary policy review for the fiscal, the Reserve Bank earlier this month maintained status-quo on interest rate citing inflationary concerns.

It revised downwards forecast for retail inflation to 4.7-5.1% for April-September and 4.4% for October-March.

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