A report by the UN Economic and Social Commission for Asia and the Pacific (ESCAP) said the Indian economy will grow 7.5 per cent next year. India's economic growth for this year is projected at 7.1 per cent before catapulting to 7.5 per cent going into the next year. The report said the forecast is “underpinned by higher private and public consumption and increased infrastructure spending.”
The International Monetary Fund projected the country's growth at 7.2 per cent in the fiscal 2017-18 and 7.7 per cent for the next financial year. While, the Asian Development Bank sees the growth jumping to 7.4 per cent in 2017-18, and 7.6 per cent in the next. India will continue to clock a better growth than China, which is expected to grow around 6.5 per cent in 2017. “Meanwhile, inflation is projected to reach 5.3-5.5 per cent in 2017 and 2018, which is somewhat above the official target of 4.5-5 per cent,” the ESCAP said. It added that a heightened financial sector risk rises from concentration of huge pile of soar assets sitting on the books of public sector banks. These banks' non-performing assets as percentage of gross advances hit almost 12 per cent in 2016. “This points to the need for bank recapitalisation.”
Regarding the demonetisation move, the UN report said the impact would be transient on the economy. However, a slower-than-expected recovery would particularly diminish the outlook for cash-intensive sectors and supply chains for agricultural products.
It added that implementation of the Goods and Services Tax, amendment of a bankruptcy law and opening up of pharmaceuticals, defence, and civil aviation sectors will help India in its economic growth. On the trends in the Asia-Pacific region, the UN ESCAP has found growth in the region moderating in recent years compared to its historical trend and a rebound in 2010.
“The region's export-oriented economic growth strategy is under pressure amid prolonged weakness in external demand and global trade. China is both a transmitter and a source of the current economic slowdown, given its role as hub in global value chains and it rebalanced towards consumption and services,” the report said.