The United Nations World Economic Situation and Prospects (WESP) 2017 report has forecasted that India's economy can grow at about 7.7 per cent in the financial year 2017 and 7.6 per cent in 2018. Report also said that the country was still the fastest growing large developing economy, on the back of robust private consumption and significant domestic reforms gradually being implemented by the government. However, it cautioned that low capacity utilisation and stressed balance sheets of banks and businesses will prevent a strong investment revival in the short term.
On the other hand, report has said that China's economy growth is likely to remain stable at 6.5 percent in the financial year 2017 and 2018, buoyed by favourable domestic demand and accommodative fiscal measures, including off-budget fiscal support through policy banks and public-private partnerships. However, it also said that the implications of China's ongoing economic rebalancing will inevitably be felt by the region in the medium and long-run through trade (including commodity prices) and financial channels, albeit to a varied extent across countries.
The report further said that in India, investment demand is likely to marginally pick up, helped by monetary easing, government efforts towards infrastructure investments and public-private partnerships and the implementation of domestic reforms such as the introduction of the Goods and Services Tax (GST) Bill. It also noted that this reform should promote investment in the medium term through lower transaction and logistic costs and efficiency gains. Its effective implementation requires adequate capacity building of the tax administration. It added that the GST reform constitutes a major change by establishing a new uniform tax rate.
Meanwhile, the report of the United Nations comes a day after the International Monetary Fund (IMF) has cut India's economic growth estimate for 2016-17 to 6.6% from its earlier projection of 7.6%, due to the impact of the government's move of demonetization of high value currency notes in early November. The World Bank too cut India's Gross Domestic Product (GDP) growth to 7 percent from its earlier estimate of 7.6 percent on note ban woes. However, report did not take into consideration the impact of the demonization policy on the country's economic growth.