India Ratings and Research on Thursday projected the country’s economic growth to improve to 7.1 per cent next fiscal from 6.5 per cent this year, buoyed by robust consumption demand.
In its outlook for 2018-19, the agency said there will be a gradual pickup in growth momentum owing to structural reforms like GST and Insolvency and Bankruptcy Code (IBC) in place.
“While the implementation of GST is likely to benefit the economy over the medium to long term, the same cannot be said about the impact of demonetisation,” India Ratings & Research (Ind-Ra), a subsidiary of Fitch Ratings, said.
Ind-Ra expects gross domestic product (GDP) to grow 7.1 per cent year-on-year in 2018-19, it said. The projection is a tad lower than 7.4 per cent growth estimated by Asian Development Bank (ADB) and International Monetary Fund (IMF) for next fiscal.
Ind-Ra said but for demonetisation and Goods and Services Tax (GST) implementation, growth would not have decelerated to 7.1 per cent in 2016-17 and 6.5 per cent in 2017-18.
With the global crude prices firming up, Ind-Ra expects retail and wholesale inflation to come in at 4.6 per cent and 4.4 per cent, respectively in 2018-19, indicating an end to the current rate cut cycle.
There is still some fuzziness with respect to the intensity and the level of its future trajectory, it said, adding that the RBI “will remain in a pause mode for an extended period of time”.
The agency said it expects fiscal deficit in 2017-18 to come in at 3.5 per cent, overshooting the budgeted estimate of 3.2 per cent.