Recent policy measures by the government to improve the investment climate and boost private consumption and investment will help India to lift economic growth in the next two fiscal years, according to a new report from the Asian Development Bank (ADB). Declining fuel and food prices are also expected to provide an impetus for domestic consumption. Reversing two years of declining growth, India’s gross domestic product (GDP) is projected to rise to 7.2 per cent in fiscal 2019, says ADB’s Asian Development Outlook (ADO) 2019. GDP if further expected to rise to 7.3 per cent in FY20 as reforms to improve the business and investment climate take effect. ADO is ADB’s annual flagship economic publication.
“India will remain one of the fastestgrowing major economies in the world this year given strong household spending and corporate fundamentals,” said ADB Chief Economist Yasuyuki Sawada. “India has a golden opportunity to cement recent economic gains by becoming more integrated in global value chains. The country’s young workforce, an improving business climate, and a renewed focus on export expansion all support this.”
ADO 2019 mentions that income support to farmers, hikes in procurement prices for food grains, and tax relief to tax payers earning less than Rs. 5,00,000 will boost household income. “Downside risks to growth include a higher-than-expected moderation in global demand and a potential escalation of trade tensions. Lower-than-targeted tax revenues or a delay in strengthening bank and corporate balance sheets could also undermine economic expansion,” the ADB report said.
The ADB expects India’s current account deficit to widen a bit to 2.4 per cent of GDP in FY19 and 2.5 per cent of GDP in FY20. “The deficit is expected to be financed comfortably by capital flows, given that India has emerged as an attractive destination for foreign investment,” the report adds.