India GDP to grow 7.4% in FY 18, GST bankruptcy law big positives: ADB

According to out data analysis so far, this possible negative impact of demonetisation was only short-lived and we still see a medium-term growth acceleration of the Indian economy," the ADB economist says

The Indian economy will grow 7.4 per cent this fiscal and 7.6 per cent in the next as the bankruptcy and GST laws will help create a better business-friendly environment, the Asian Development Bank (ADB) said on Wednesday

Ahead of its 50th annual meeting to be attended by finance minister and central bank governors of member nations, the multilateral agency's Chief Economist Yasuyuki Sawada said the reforms like the Goods and Services Tax (GST) and the new bankruptcy law will make it easier to do business in India.

"India's growth rate is picking up, 7.4 per cent this year and next year 7.6 per cent," he told a media briefing. The growth rate compares to 7.1 per cent of the previous fiscal. "Over 7 per cent growth rate is high if we compare it to other emerging market economies and also China. Behind this is cyclical factor, improved terms of trade. The Indian government adopted new bankruptcy law that improved the business enabling environment. That is a shortterm and medium-term factor behind the gross acceleration in India," Sawada said.

On the impact of demonetisation of old 500 and 1,000 rupee notes that took out 86 per cent of the currency in circulation, he said the move obviously generated short-term decline in cash-based transactions and consumer sentiment. "But according to out data analysis so far, this possible negative impact of demonetisation was only shortlived and we still see a medium-term growth acceleration of the Indian economy," the ADB chief economist said. ADB, he said, had not studied if the demonetisation had any consequences on black money. "But overall, as far as we monitored growth rate trend and macro-economic indicator, the demonetisation seems to have generated only a shortlived impact," Sawada said.

The GST, the biggest indirect tax reform since independence, together with the new bankruptcy law are big positives for India, he said. The bankruptcy law and the GST will help in creating a better business enabling environment, which seems to be a factor behind this gross acceleration of India, he added.