With 7.3 per cent growth rate in 2018-19 and 7.6 per cent in 2019-20, India will continue to be the fastest growing major economy, ahead of China, the Asian Development Bank (ADB) said on Thursday. Increased public spending, higher capacity utilisation rate and uptick in private investment will be the major reasons for the growth.
While retaining India's growth rate for current fiscal and the next, ADO said economic growth in China will decelerate to 6.6 per cent in 2018 and further to 6.4 per cent in 2019. China's growth rate was 6.9 per cent in 2017.
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On India, it said: "In sum, the GDP growth forecast for FY2018 (ending March 2019) is maintained at 7.3 per cent. Growth in FY2019 is expected to rise to 7.6 per cent as measures taken to strengthen the banking system bolster private investment and as benefits kick in from the goods and services tax. Any further increase in oil prices poses a downside risk to growth."
ADB said India is the dominant economy in the South Asia sub-region with its growth gaining momentum at 7.7 per cent in the last quarter ended March of 2017-18, the highest rate of growth since first quarter of 2016-17.
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This pushed full-year growth to 6.7 per cent (2017-18), a tad higher than estimated in ADO 2018 , largely driven by government spending for both consumption and public administration.
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In India, the private consumption is expected to grow at a healthy rate as disruption caused by demonetisation in 2016 fades. Capacity utilisation rates are at their highest in 4 years and should provide incentives to firms to invest.
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Growth in Asia and the Pacific's developing economies for 2018 and 2019 will remain solid as it continues apace across the region, despite rising tensions between the US and its trading partners.
Developing Asia is largely on track to meet growth expectations as set out in April in Asian Development Outlook 2018 (ADO 2018), said the report. The regional gross domestic product (GDP) is forecast to expand by 6 per cent in 2018 and 5.9 per cent in 2019, the rate envisaged in April, ADO supplement said.
In April, ADO had said that India's economic growth will rise to 7.3 per cent this fiscal and further to 7.6 per cent in the next financial year, retaining the fastest-growing Asian economy tag, on back of GST and banking reforms.
(With PTI inputs)