The Fitch group company, BMI Research in its latest report has said that Indian economy may recover in the coming quarters and is likely to log a real Gross Domestic Product (GDP) growth of 6.9% in fiscal year 2017-18, though it also noted that real GDP growth slowed substantially to 6.1% year-on-year in Q4FY17. As per the report, India's growth is expected to pick up after the impact of 2016 November's demonetisation drive, but debt-laden state-run banks will likely stop the recovery before its full potential.
BMI Research has said that the negative effects from the demonetisation measure is already wearing off, and the Indian economy will likely benefit from positive demographic trends, greater external stability (due to improved terms of trade from lower oil prices), and continued reforms that should help to improve the country's admittedly poor business environment.
The report however stated that the public sector banking is still weak and plagued with mounting non-performing assets (NPAs), and it is likely to weigh on India's growth potential. It further added that despite the Reserve Bank of India's efforts to clean up these bad loans, these will likely take some time to be worked through the system, and therefore, credit allocation to the productive sectors of the economy is likely to be negatively affected.