Demonetisation, GST to eat off India’s economic growth even next year

The after-effects of the demonetisation exercise and the GST implementation will continue even into the next financial year, the OECD has said while cutting India’s growth forecast for fiscal 2018-19 by half a percentage point.

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According to a report by BMI Research, India's growth is expected to pick up following the negative ramifications from the demonetisation drive in November 2016, but weak public banks will likely cap the recovery. (Reuters)

The after-effects of the demonetisation exercise and the GST implementation will continue even into the next financial year, the OECD has said while cutting India’s growth forecast for fiscal 2018-19 by half a percentage point.

The Organisation for Economic Co-operation and Development (OECD) forecasts growth outlook of India in 2018-19 at 7.2%, down by 0.5%. The Paris-based think tank had earlier projected India’s economy to expand at 7.7% in 2018-2019, but did a downward revision in the country’s growth predictions. The inter-governmental economic organisation has also cut growth outlook for this year at 6.7 per cent, down 0.6 point from the forecast earlier made in June, even as it raised global growth forecast for 2018 to 3.7%, reported AFP.

“In India, the transitory effects of demonetisation and of the implementation of the Goods and Services Tax (GST) have led to a downward revision in 2017 growth projections”, said the OECD .

Earlier this year, OECD Secretary-General Angel Gurria year had cautioned India against complacency by policy makers. Gurria also predicted that the demonetisation would continue to “bite” in the coming quarters, PTI reported.

“There is no time for complacency. The reform momentum must be maintained,” he had said while suggesting that India should take steps to revise the labour laws, handle banks’ stressed assets and ease stringent product regulations.

The OECD has also warned that the global growth is not secure due to weak investment by businesses and slow growth in trade.

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