Hiccups apart, GDP heads for resounding recovery: ADB

Notwithstanding the second successive lowering of GDP estimates for India by the Asian Development Bank (ADB) by 50 basis points, the regional development bank is very optimistic of the India growth story. In the report 'Update of Asian Development Outlook (ADO) 2019', the bank said that the growth rate is expected at 6.5 percent during the current fiscal. This reduction is mainly on account of weaker expansion in the first quarter (April-June) when the growth rate was 5 percent, but below the 8 percent GDP growth recorded during the corresponding period of the last fiscal (2018-19). India will remain as one of the fastest-growing economies in the world this year and the next as the government continues to implement policy reforms and interventions to strengthen economic fundamentals. Chief Economist, ADB, Yasuyuki Sawada said that India will bounce back with proactive policy interventions along with a recovery in domestic demand and investments. It has maintained the growth estimate for 2020-21 at 7.2 percent. According to the report, significant corporate tax cuts announced by the government recently will uplift private investment, including FDI, and enhance India’s global competitiveness. Bank recapitalization, support measures for non-banking financial companies, and cuts in monetary policy rates should improve the health of the financial sector, while increasing the credit flow to industry and infrastructure projects. Other measures such as direct income support for small farmers, tax relief for low-income taxpayers, and reduced loan interest rates, are expected to boost rural and urban consumption across the country. Fast-tracking of goods and services tax refunds should provide an important boost to small and medium-sized firms that have been constrained by a shortage of working capital. Implementation of these measures will brighten prospects for India’s economy in 2020-21.