Reserve Bank of India (Reuters)
QNB Group has published its India Economic Insight 2017 report. The report examines the impact of demonetisation and the government’s reform agenda on the Indian economy.
According to the report, it is expect real GDP growth to accelerate to 7.4 percent in 2017/18 as spending rebounds from the shock of demonetisation; in 2018/19 and 2019/20 growth should fade slightly on fiscal consolidation.
Successful implementation of important reforms should support investment growth—for example higher public capital spending and a new harmonised goods and services tax (GST) should increase inter-state trade and attract foreign capital.
Inflation is expected to accelerate to 5.2 percent in 2017/18 on rising food prices following an exceptionally good monsoon season the previous year and stronger energy prices.
"We expect inflation to then stabilise at 5.0 percent in 2018/19 and 2019/20, in line with slower growth in food and oil prices; inflation will remain between the RBI’s range of 4 +/- 2 percent Inflation ( percent change, annual average)," said the QNB report.
"Fiscal consolidation is planned to continue with the deficit narrowing from an estimated 6.7 percent of GDP in 2016/17 to 5.8 percent in 2019/20 Consolidation will be achieved mainly through current spending restraint, especially on wages and subsidies," added the report. Implementation of the GST will raise revenues by increasing the tax base and boosting inter-state trade.
QNB expects credit growth to reach 8.8 percent in 2017/18 and 2018/19 and pick up to 9.0 percent in 2019/20, as confidence improves with the demonetisation shock fading and bank balance sheets strengthen on a government $10.4bn capital injection
Deposit growth should slow in 2017/18 to 9.1 percent and stabilise thereafter, as withdrawal limits imposed during demonetisation are relaxed
"Consequently, we expect the loan-to-deposit ratio to decline from an estimated 74.3 percent in 2016/17 to 73.9 percent by 2019/20," stated the report.
Other recent QNB Economic Insight reports include China, India, Indonesia, Jordan, Kingdom of Saudi Arabia, Kuwait, Oman, Qatar, Singapore, the United Arab Emirates and Vietnam and are available on the QNB Group website. QNB Group operates in more than 30 countries across 3 continents and its economic reports leverage its knowledge of these markets to provided added value for its clients and counterparties.
