Indian economy to recover gradually to 7.1% in FY2019

New Delhi: Indian economy is likely to recover gradually to 7.1 percent in 2018-19 financial year as disruptions from a shock ban on high-value currency notes in November 2016 and the chaotic launch of a goods and services tax (GST) in July are fading, says a report.

"We expect the economy to recover gradually to 7.1 percent in FY2019 as GST related disruptions smoothen and as consumption improves amid stable wages and expected payouts from states' implementation of 7th Central Pay Commission," Kotak Economic Research said in a note.
Moreover, improving global growth prospects are further expected to remain supportive of the growth.

According to the Central Statistics Office's second advanced estimate, the economy would grow at 6.6 percent in the current fiscal ending March 31 compared to 7.1 percent in 2016-17. The growth rose to a five-quarter high of 7.2 percent in the October-December period.

"While the ongoing gradual improvement in private investment continues to provide hope of a revival in the capex cycle, the spare capacity in the economy along with a slow resolution of twin balance sheet problems are expected to continue to constrain growth in FY2019," it added.

On the Reserve Bank's policy stance, the report said that the Central Bank is expected to maintain a status quo through the first half of this calender year.

"In the backdrop of a gradual recovery, we expect RBI to maintain status quo at least through 1HCY18 while closely assessing the upcoming inflation prints," it said.

While the RBI kept rates on hold at its February 7 meeting, the minutes showed monetary committee members concerned about the rising inflation rate. Retail inflation eased in January after a 17-month spike in December, but was still above the 4 percent medium-term target of the central bank.

With Agency Inputs