In a major relief to the Central Government, the Asian Development Bank has opined that India’s GDP will go up if the Government can implement the new Goods and Services Tax (GST) properly.
The Manila-based Asian Development Bank has estimated that India’s economic growth will be rebound to 7.3% in the current fiscal year and grow at 7.6% further in FY20 on the back of structural reforms such as GST and clean banking. In its Asian Development Outlook 2018, the Bank has credited the new tax regime saying that growth will pick up as the new tax regime improves productivity.
The report noted that the dip in growth to 6.6% in FY2017 was driven in part by lingering effects of demonetization, which impacted the informal sector in the first half of FY2017. Teething issues related to the implementation of the Goods and Services Tax (GST), which hampered operations of small and medium-sized enterprises and exporters, also contributed to growth moderation.
“Despite the short-term costs, the benefits of reform—such as the recently implemented GST—will propel India’s future growth,” said Yasuyuki Sawada, ADB’s Chief Economist. “Robust foreign direct investment flows attracted by liberalized regulations, and the government’s steps to improve the ease of doing business will further bolster growth.”
“A pickup in growth in advanced economies will likely help exports to grow at a healthy rate. At the same time, imports are also expected to increase as a result of higher commodity prices and the uptick in domestic demand. With the rise in imports offsetting the increase in exports, the current account deficit is expected to widen a bit to 2.2% of GDP in FY2018 and 2.4% of GDP in FY2019. The current account deficit is expected to be financed comfortably by capital flows, as India remains an attractive destination for foreign direct investment and portfolio flows,” it said.
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