India on Monday seems to be set to reclaim its position as the fastest-growing major economy in the world, as the government sees the country’s economic expansion to accelerate in the next fiscal year.
Following a recent slowdown, the government estimated a 7 and 7.5 percent economic growth rate in the 2018-2019 fiscal year. It should be enough for India to reclaim its title.
Real gross domestic product (GDP) growth is likely to hit 6.75 percent in the second half of this fiscal year due to a series of significant reforms carried out in the previous year. Reforms are likely to strengthen in the coming fiscal year as well.
GDP growth might be at the lower end of the range, but the forecast is still largely in line with their expectations, said senior economist Suvodeep Rakshit.
The finance ministry released the economic survey days ahead of the annual federal budget. Finance Minister Arun Jaitley will be presenting the government’s budget statement on Thursday.
Improvement in exports will mainly contribute to the India’s overall economic expansion, while a liberalization of foreign investment policies would help speed up growth.
The forecast came after India experienced its slowest development in three years in 2017-2018. Lower exports and declining private investment attributed to the slowdown.
Additionally, problems in the rollout of a nationwide goods and service tax (GST) as well as the unexpected cancellation of about 86 percent of cash circulation in November 2016 weighed down growth as well.
Oil Prices Still a Risk for India
The finance ministry cautioned that the coming year could be challenging. There are still uncertainties next fiscal year, particularly on the prospect of oil prices rising in the global market.
India greatly relies on oil imports to address most of its fuel needs. It imports over 70 percent of its oil to meet domestic demand.
There will be a 7 percent boost if oil prices were maintained or raised, according to chief economist Abheek Barua.
Nonetheless, the country’s overall economic activity is likely to pick up. Investment is likely to grow, while the economy should have a steadier reaction to the latest tax system.
The survey cited moderate progress in the world’s economy this year for India’s economic improvement. A more stable GST, a rebound in investment levels, and ongoing structural reforms should also be supporting stronger growth.
Global organization the International Monetary Fund (IMF) expects Indian economy to grow at 7.4 percent this year.