World Bank lowers FY17 growth rate to 7.2%

The World Bank on Monday lowered the growth projection of the Indian economy for 2017-18 to 7.2% from the earlier 7.6%.The bank also estimated that the economy decelerated to 6.8% in 2016-17 fiscal from the earlier projection of 7%, saying demonetisation has slightly disrupted the country’s growth recovery.

“Demonetisation caused an immediate cash crunch. As a result, a modest slowdown is expected in the Gross Domestic Product (GDP) growth in 2016-17 to 6.8%,” said Junaid Ahmad, World Bank Country Director.

The World Bank had in January lowered the 2016-17 growth projection for India to 7% from an earlier 7.6% due to demonetisation.

“In November 2016, demonetisation caused a cash crunch that affected India’s large informal economy and its financial sector, offsetting some of the gains in the rural economy. High-frequency indicators pointed to a significant dent in growth, but the economy continued to



expand in Q3 FY17 (October-December 2016), albeit at a somewhat slower quarterly pace,” the World Bank India Development report stated.

Incidentally, the Bank’s estimate for 2016-17 comes just two days ahead of India’s official GDP estimates for the same fiscal.The report said that India will remain the fastest growing economy in the world in 2017-18 on the back of reforms, domestic consumption and improvement in trade. In January, the Bank had projected India to grow at 7.6% in 2017-2018 fiscal and 7.8% in 2019-20.

“The growth is expected to recover in 2017-18 to 7.2% and is projected to gradually increase to 7.7% in 2019-20,” the report stated.

“A higher economic growth by 2019-20 is underpinned by a recovery in private investments, which are crowded-in by the recent increase in public capital expenditure and improvement in the investment climate,” the report added.