The World Bank has sharply cut its economic growth forecast for India to 7 per cent in 2016-17 after taking into account the impact of demonetisation and the fall in private investments.

This growth forecast is lower than the 7.6 per cent growth projected in the middle of last year.

“Growth in India is estimated to reach 7 per cent in the financial year 2017...reflecting a modest downgrade to India’s expansion,” the World Bank said in its Global Economic Prospects report, released in Washington on Tuesday.

Unexpected demonetisation — the phasing out of large denomination currency notes — weighed on growth in the third quarter of 2016-17, it added.

The World Bank report said that weak industrial production and manufacturing and services purchasing managers’ indexes suggest a setback to activity in the fourth quarter of 2016-17.

The Central Statistics Office had last week pegged the 2016-17 advance real GDP estimate at 7.1 per cent. The statistics agency had, however, consciously not factored in the surge in bank deposits while calculating growth in the financial services group.

Rebound on cards The World Bank sees GDP growth rebounding in 2017-18 to 7.6 per cent, a tad lower than the 7.7 per cent projected earlier.

It has also made a 0.1-percentage-point increase in the growth forecast for 2018-19 to 7.8 per cent. India is expected to maintain this growth in 2019-20.

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