The World Bank said that India’s growth rate is likely to fall to 6% as the economy battles an economic slowdown. The growth rate stood at 6.9% in 2018-2019.
The World Bank though said that GDP growth rate was expected to gradually recover to 6.9% in 2021 and 7.2% in 2022. The ‘South Asia Economic Focus’ report said growth will recover as rural demand benefits from effects of income support schemes, results of tax incentives and credit growth resumes.
In the quarter ended June, India’s GDP growth slowed down to 5%. This is the slowest pace in which the economy has expanded since March 2013, when the growth rate was 4.7%. The slowing down of household, which also affected other sectors, demand was one of the major factors for the decline.
The World Bank noted that growth decelerated for the second consecutive year and pointed out to the widening current account deficit. India’s current account deficit, a parameter which reflects the trade balance, was 2.1 of the GDP in 2018-19 from 1.8% a year earlier.
In the first quarter of 2019-20, the economy experienced a significant and broad-based growth deceleration with a sharp decline in private consumption on the demand side and the weakening of growth in both industry and services on the supply side, the report said.
Reflecting on the below-trend economic momentum and persistently low food prices, the headline inflation averaged 3.4% in 2018-19 and remained well below the RBI’s mid-range target of 4% in the first half of 2019-2020. This allowed the RBI to ease monetary policy via a cumulative 135 basis point cut in the repo rate since January 2019 and shift the policy stance from “neutral” to “accommodative”, it said.