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India’s GDP growth to recover to 7.2% in FY18: UBS

LiveMint logoLiveMint 02-06-2017 PTI

New Delhi: India’s gross domestic product (GDP) growth is expected to recover from 7.1% in 2016-17 to 7.2% this fiscal and further to 7.7% in 2018-19 largely driven by the government’s reform push and recovery in private investments, says a report.

According to official data, India’s growth rate slipped to 6.1% in the January-March quarter and 7.1%, during 2016-17. Global financial services major UBS said the gradual pace of recovery will help improve productivity dynamics and lay the foundation for sustainable growth.

The report lauded the ongoing reform push of the government, like goods and services tax (GST), inflation targeting, a new bankruptcy code, financial inclusion, liberalisation of foreign direct investment (FDI), measures to curb black money and encouraging digitalisation, among others.

“The Indian economy has benefited over the past few years from favourable terms of trade shocks and conscious policy initiatives, which have helped lower macro stability risks and improve productivity dynamics,” Tanvee Gupta Jain, economist at UBS Securities India said in a research note.

“We expect India’s GDP growth to recover to 7.2% and 7.7% in 2017-18 and 2018-19, respectively,” she added. The report further said the current financial year might witness uneven growth recovery largely led by household consumption and the pick-up in growth is expected to be more broad-based in 2018-19 driven by recovery in private investment.

“We expect the pick-up in growth to be more broad-based in 2018-19, largely led by a recovery in private investment (private corporate plus household capex), as growth in consumption and export stabilises,” the report noted.

According to UBS, India’s growth outlook depends on the ability of the policymakers to undertake structural reform in labour, land, capital and business. The most critical reform include resolution of stressed assets in banking system, GST and easing of supply- side bottlenecks.

Also, policy efforts towards stepping up infrastructure investment, labour market reform and measures to boost manufacturing growth will all help improve India’s medium-term growth outlook, it added.

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