The twin effect of GST and demonetisation seem to be taking a heavy toll on India’s economy, even if just for a short term, with now the International Monetary Fund cutting the country’s current fiscal year 2017-18 by 50 basis points to 6.7%, even while boosting the global growth outlook. Further, IMF cut India growth forecast for the next year 2018-19 by 30 basis points to 7.4%.
The short-term pain that has befallen upon Indian economy was made evident by the comment that growth forecast is cut due to lingering effects of disruption caused by demonetisation and transition costs of GST, even as IMF said that GST and other reforms could push India’s growth to above 8% in the medium term. IMF boosted the global GDP growth forecast for the current calendar year 2017 by 10 basis points to 3.6%
Of late, Prime Minister Narendra Modi’s NDA-led government has come under fire from not only the members of opposition, but also BJP’s own senior leaders including Subramanian Swamy, Yashwant Sinha, Arun Shourie and others for alleged mismanagement of the economy. Earlier this month, Yashwant Sinha, former Finance Minister in the Atal Bihari Vajpayee administration, wrote a column in The Indian Express criticising the government’s radical moves such as demonetisation and implementation of GST.
Recently, India’s GDP growth disappointed for the second straight quarter, slowing down to a mere 5.7% in Ap-Jun and pitting the country behind China on the list of world’s fastest growing major economies. The 5.7% fiscal first quarter GDP growth was much lower than the 7.1% seen in the same quarter a year ago, and from 6.1% in the preceding quarter. Much of the blame for this was put on the twin effects of GST and demonetisation.
The government, on its part, has repeatedly sought to assure the nation that the economy is only under a short-term pressure due to the structural economic reforms underway. Last week, Finance Minister Arun Jaitley said that the issues hurting the economy in the near term will be addressed, adding that structural reforms may involve a phase of transformation. India is doing very well in the current global situation Arun Jaitley said, adding that it’s probably for the first time that India has been the fastest growing major economy for three straight years.