Describing the outlook for India as largely favourable, the United Nations in its ‘World Economic Situation Prospects’ report, has expressed hopes that the country’s Gross Domestic Product (GDP) will grow at 7.2 percent in the year 2018 and go up further to 7.4 percent in the following year. Despite the slowdown witnessed in early 2017 and the lingering impact of demonetization policy, it has projected positive outlook for India, on the back of robust private consumption, public investment as well as ongoing structural reforms.
However, the report warned that the anaemic performance of private investment remains a key macroeconomic concern for India. Besides, it showed that growth in gross fixed capital formation, which is a proxy for investment demand in the economy, has dropped to 30 percent in 2017, from 40 percent in 2010, amid subdued credit growth, low capacity utilisation in some industrial sectors and balance sheet problems in the banking and corporate sectors. It also explained that in this environment, vigorous public investment in infrastructure has been critical in propping up overall investment growth.
As per the report, there was some degree of uncertainty over the monetary policy stance in India. It noted that subdued inflation, together with a good monsoon season, offers scope for additional monetary easing. It also said that the country’s fiscal deficit has declined visibly, and it is expected to narrow further to 3.2 percent of GDP in 2018. It added that an upturn in the global economy now growing by about 3 percent paves the way to reorient policy towards longer-term issues such as addressing climate change, tackling existing inequalities and removing institutional obstacles to development.