India remained ahead of China to retain the tag world’s fastest growing large economy withstanding several ups and downs, spike in oil prices and global trade war like situation during 2018.
Indian economy’s roller-coaster ride during the year gone by was best captured by the GDP growth.
In the first quarter of 2018-19 ending June 30, it grew at an impressive 8.2 percent, after 7.7 per cent in the first three months of the year.
Then it slipped to 7.1 per cent in the next quarter ending September 30. Fitch Ratings slashed India’s GDP growth forecast to 7.2 percent for the current fiscal, from 7.8 percent projected in September, citing higher financing cost and reduced credit availability.
Experts, however, expect that moderating growth can force the government to spend more before the next general elections and that could lead to fiscal pressures.
Global factors such as sudden zoom in crude prices (which are now easing), strengthening US dollar, slowing growth in the wake of US-China trade war and the US Federal Reserve hiking interest rate for the fourth time in a year did take the toll on India’s economy.
A good news for the economy was India’s improved ranking on the World Bank’s ‘ease of doing business’ report for the second straight year, jumping 23 places to the 77th position on the back of reforms related to insolvency, taxation and other areas.
Collection of the Goods and Services Tax (GST) crossed the Rs 1 lakh crore mark in October, after a gap of five months, but again slipped below the mark to Rs 97,637 crore in November. Yet, it was higher than the average monthly collection in the year. Steady increase in average collection raised hopes of monthly collection to remain above Rs 1 lakh crore next year.
Inflation has remained well below the forecasts by the RBI, which targets to keep inflation at 4 percent in the medium term. During the April-October period, industrial output grew 5.6 percent as compared to 2.5 percent in the same period of the previous fiscal. In October, it stood at a 11-month high of 8.1 per cent.
On inflation, Dun & Bradstreet in a report said: Going forward, there are concerns over fiscal slippage due to likely expenditure on pre-poll sops before the Lok Sabha elections next year. The Congress party’s promise of universal farm loan waiver, if it comes to power is likely to force the hand of the BJP government, which has so far stuck to fiscal prudence.
Having witnessed controversy over host of issues like demonetisation, implementation of GST and the government’s handling of banking sector woes, the year also witnessed political slugfest over revised GDP data, which showed that growth during the previous Congress-led UPA’s regime was less than what was estimated earlier.
Recalibrating data of past years, using 2011-12 as the base year instead of 2004-05, the Central Statistics Office (CSO) lowered the country’s economic growth rate during the previous Congress-led UPA’s regime.