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09-Apr2019

India's GDP growth to accelerate moderately to 7.5% in FY20: World Bank

The World Bank in its latest report on South Asia has said that India's Gross Domestic Product (GDP) growth is expected to accelerate moderately to 7.5% in the fiscal year 2019-20 (FY20), supported by continued investment strengthening, particularly private-improved export performance and resilient consumption. It added that the real GDP growth is estimated at 7.2% in 2018-19. Its data for the first three quarters suggested that growth has been broad-based. Industrial growth accelerated to 7.9%, making up for a deceleration in services. Meanwhile, agriculture growth was robust at 4%.

On the demand side, the report has said that domestic consumption remained the primary growth driver, but gross fixed capital formation and exports both made growing contributions. Over the last quarter, growth is expected to remain balanced across sectors. Inflation dynamics have been subdued over most of FY19. Besides, with robust growth, and food prices poised to recover, inflation is expected to converge towards 4% and added that both the current account and the fiscal deficit are expected to narrow.

On the external front, World Bank has said improvements in India's export performance and low oil prices should bring about a reduction in the current account deficit to 1.9% of the GDP. On the internal front, the consolidated fiscal deficit is projected to decline, albeit slowly (to 6.2 and 6% of the GDP in FY20 and FY21, respectively). As the Centre's deficit is budgeted to remain unchanged at 3.4% of GDP in FY19/20, the burden of adjustment will rest on the states. It noted that a sustained decline in food prices since July 2018, subsequently complemented by the softening of oil prices and concomitant appreciation of the rupee, has led to a steady decline in inflation.


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