The Indian economy is expected to gather steam and expand by 7.2 percent in 2018 and further rise to 7.4 percent in 2019, driven by robust private consumption, public investment and structural reforms that are in progress according to a United Nations report released on Monday.
"The outlook for India remains largely positive, underpinned by robust private consumption and public investment as well as ongoing structural reforms. Hence, GDP growth is projected to accelerate from 6.7 percent in 2017 to 7.2 per cent in 2018 and 7.4 percent in 2019," the report said.
This UN's stable outlook for the Indian economy came despite the slowdown observed early this year due to the effects from demonetisation and the confusion spurred by the implementation of the Goods and Services Tax (GST) -- suggesting that the economy is gradually adjusting with the changes, the Press Trust of India reported.
But, the report also pointed out that the performance of private investment remains a key macroeconomic issue.
"Gross fixed capital formation as a share of GDP has declined from about 40 percent in 2010 to less than 30 per cent in 2017, amid subdued credit growth, low capacity utilisation in some industrial sectors and balance sheet problems in the banking and corporate sectors," the report said.
In this environment, vigorous public investment in infrastructure has been critical in propping up overall investment growth," it added.
However, bank recapitalisation and the Indian Bankruptcy Code (IBC) introduced to deal with companies facing insolvency are likely to revive credit growth according to experts.
Further, the UN also expects the overall outlook for South Asia to also remain stable. It expects most of the economies in South Asia to report stronger growth rates in 2018 compared to 2017.
"The economic outlook remains steady and largely favourable in South Asia, driven by robust private consumption and sound macroeconomic policies," said the report.
Last week, even Morgan Stanley projected India's economy to accelerate to 7.5 percent in 2018 from current 6.3 percent and further rise to 7.7 percent in 2019.
Asia's third-largest economy expanded 6.3 percent in the July to September period from a year earlier, bouncing back from a three-year low economic growth of 5.7 percent in the previous quarter.
