DOHA, Qatar--(EON: Enhanced Online News)--According to the report, it is expecting real GDP growth to accelerate to 7.4% 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% 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% 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%. Fiscal consolidation is planned to continue with the deficit narrowing from an estimated 6.7% of GDP in 2016/17 to 5.8% in 2019/20.
Consolidation will be achieved mainly through current spending restraint, especially on wages and subsidies. Implementation of the GST will raise revenues by increasing the tax base and boosting inter-state trade. Credit growth is expected to reach 8.8% in 2017/18 and 2018/19 and pick up to 9.0% in 2019/20, as confidence improves with the demonetisation shock fading and bank balance sheets strengthen on a government USD10.4bn capital injection. Deposit growth should slow in 2017/18 to 9.1% 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% in 2016/17 to 73.9% by 2019/20.
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*Source: ME NewsWire