WB cuts GDP forecast to 7%

WB cuts GDP forecast to 7%

Upbeat about next two years

WB cuts GDP forecast to 7%

The World Bank on Wednesday revised India’s GDP growth rate projection for 2016-17 from 7.6% to 7%, but at the same time struck an optimistic note for the years to follow.

The steep cut comes five days after the Reserve Bank of India (RBI) lowered its growth forecast by 0.5% to 7.1%.

In its first report since the government junked high-value notes on November 8, the World Bank said demonetisation had “contributed to slowing growth in 2016”.

“Indian growth is estimated to have decelerated to a still robust 7% (in fiscal 2017 ending on March 31, 2017), with continued tailwinds from low oil prices and solid agricultural output,” it said. Last month, multilateral funding agency Asian Development Bank also lowered its forecast to 7% from its earlier 7.4%. India is expected to regain its momentum in a year, with growth rising to 7.6% in 2017-18 and strengthening to 7.8% in 2019-20, the World Bank said.

It expects reform initiatives to unlock domestic supply bottlenecks and raise productivity. Infrastructure spending should improve the business climate and attract investment in the near term, it said.

In India, cash accounts for more than 80% of all transactions, the World Bank said, noting that demonetisation could continue to disrupt business and household economic activities in the short term.