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Domestic demand to aid India's growth in 2019-20: ADB

Wednesday, April 3, 2019
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Key policy measures by the government to improve the investment climate and boost private consumption and investment will help India lift its economic growth in the next two fiscal years, an Asian Development Bank (ADB) report said on Wednesday.

In its Asian Development Outlook (ADO) 2019, the ADB projects India's gross domestic product (GDP) growth to rise to 7.2 per cent in 2019 and reach 7.3 per cent in fiscal 2020, reversing two years of declining growth as reforms to improve the business and investment climate take effect. 

"India will remain one of the fastest-growing major economies in the world this year given strong household spending and corporate fundamentals," said ADB Chief Economist Yasuyuki Sawada. 

"India has a golden opportunity to cement recent economic gains by becoming more integrated in global value chains. The country's young workforce, an improving business climate, and a renewed focus on export expansion all support this."

Besides, the report said that the income support to farmers, hikes in procurement prices for food grains, and tax relief to tax payers earning less than Rs 500,000 ($7,212) will boost household income. 

Declining fuel and food prices are also expected to provide an impetus for consumption. An increase in utilisation of production capacity by firms, along with falling levels of stressed assets held by banks and easing of credit restrictions on certain banks, is expected to help investment grow at a healthy rate.

However, the downside risks to growth include a higher-than-expected moderation in global demand and a potential escalation of trade tensions. Lower-than-targeted tax revenues or a delay in strengthening bank and corporate balance sheets could also undermine economic expansion.

On inflation, the report said that consumer price inflation is expected to rise to 4.3 per cent in finacial year 2019, and 4.6 per cent in the following one, as food costs increase slightly and domestic demand strengthens. 

Given that inflation is expected to average around 4 per cent in the first half of fiscal 2019, the central bank would have some room for lowering policy rates, the report said. 

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Source: IANS
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