New Delhi: After a disappointing first quarter, India’s GDP is expected to grow around 6.4 per cent in 2017-18, according to SBI Research report. It was last in FY14 that the GDP had grown by 6.4 per cent. However, former chief economist of World Bank and chief economist of India Kaushik Basu said that the downturn in India’s growth is “very worrying” underscoring that this is the “hefty price” the country had to pay for demonetisation.
The GDP growth dropped to a three-year low of 5.7 per cent during April-June as manufacturing dipped and impact of the demonetisation lingered on. “We believe GDP growth in current fiscal will remain weak. The second quarter GDP numbers are likely to be closer to first quarter. We however see, GDP growth picking up pace in third quarter and in fourth quarter the growth is likely to cross 7 per cent. We are hopeful of a better fourth quarter, but that is crucially dependent on outcome of resolution of stressed assets that falls due in fourth quarter,” said SBI.
Meanwhile, Mr Basu said 2.3 percentage points of growth has been lost due to demonetisation. “The downturn in growth is very worrying. I knew it would go below 6 per cent because the demonetisation was a big negative shock to the economy. But 5.7 per cent growth is lower than I expected,” said Mr Basu, former senior VP and chief economist of the World Bank.
He pointed out that from 2003 to 2011, India was growing typically over 8 per cent per annum. “Now with oil prices so low, China ceding space to India, our growth should have been back to well over 8 per cent. Hence, the first quarter growth this year of 5.7 per cent implies 2.3 percentage points of growth has been lost due to demonetisation. This is a hefty price,” Mr Basu said. “But the demonetisation mistake and inadequate performance of the export sector means that the overall performance has been disappointing. These mistakes can be corrected,” he said.
