India's growth is expected to pick up to 7.3 percent in fiscal year (FY) 2018 and 7.6 percent in FY2019, following the estimated 6.6 percent in FY2017, says a new Asian Development Bank (ADB) report.
In its new Asian Development Outlook (ADO) 2018, ADB forecasts that the impact of demonetization of high-value banknotes has dissipated and the full implementation of the Goods and Services Tax (GST) will bolster growth through 2019.
"Growth in South Asia remains among the world's fastest, driven by a recovery in India, the region's largest economy," ADB said in the report. ADO is ADB's flagship annual economic publication.
It also noted that growth picked up across most of the economies in developing Asia, supported by continued high demand for exports and rapidly expanding domestic demand. ADB forecasts GDP growth in Asia and the Pacific to reach 6 percent in 2018 and 5.9 percent in 2019, a slight deceleration from the 6.1 percent registered in 2017.
"Economies across developing Asia will maintain the current growth momentum driven by sound policies, expanding exports, and robust domestic demand," said Yasuyuki Sawada, ADB's chief economist. "Strong regional trade links and rising financial buffers position the region well to withstand potential external shocks, including the risks of rising trade tensions and rapid capital outflows."
While talking about India's GDP rating, it is interesting to note that rating firms Moody's, Standard & Poor's (S&P) and Fitch had also pointed out the positive impact of demonetization, GST and other reforms on the GDP growth.
In its Global Economic Outlook report released in February, Fitch had said that India's growth is expected to touch 7.3 percent next fiscal and 7.5 percent in 2019-20 on account of increased investment in infrastructure and waning of the disruptions caused by the GST rollout.
Moody's also kept India's GDP growth estimates unchanged at 7.6 percent for 2018 and at 7.5 percent for 2019. It said that the Indian economy is starting to recover from the negative impact of demonetization and disruption caused by GST rollout.
In November 2017, Standard & Poor's (S&P) had maintained India's sovereign ratings at BBB- with a stable outlook. It estimated India's economy to grow robustly from 2018-20 with robust foreign exchange reserves rising further.