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29 September 2017
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India (The Total Investment & Insurance
Solutions)
Reforms over the past year have
created disruption in India's GDP numbers, but the medium term potential looks
bullish, and considering the growth trend, it could become the world's
third-largest economy in the next decade, says an HSBC report. The Total Investment & Insurance
Solutions
According to the global financial
services major, although reforms over the past year have caused disruptions
that will likely mean lower growth rates in the near term, they should allow
India to unleash more of its undoubted potential over the medium term. The Total Investment & Insurance
Solutions
"Although just 3 per cent of global
GDP today, India's trend growth should see it overtake Japan and Germany to
become the world's third-largest economy within the next decade," HSBC
said in a research note.
India is caught between two worlds --
one slowing and the other reviving -- according to the report. The Total Investment & Insurance
Solutions
"The first India will be seen
this year and the next (FY18 and FY19, year-end March). This India is
experiencing weak growth across the main sectors," HSBC said. The Total Investment & Insurance
Solutions
It added that "the second India
will appear on a three- year-plus horizon (FY20 and beyond) in our view. This
India looks more attractive".
In line with this narrative, HSBC
expects growth to slow from 7.1 per cent last year to 6.5 per cent over 2017-18
and 7 per cent in 2018-19, before moving higher to 7.6 per cent in 2019-20. The Total Investment & Insurance
Solutions
India's GDP growth slipped to a
three-year low of 5.7 per cent in April-June as disruptions caused by
demonetisation spilled over to the third straight quarter amid slowdown in
manufacturing activities.
By fiscal 2019-20 and beyond, HSBC
said, the short-term disruptions of the current reforms would have settled.
"We have estimated that in the
medium term, GST alone could add 40 bps to GDP growth emanating from its
productivity and efficiency gains," HSBC stated, pointing to the
resolution of "initial wrinkles" in other reforms such as the
Bankruptcy Code and the Real Estate (Regulation and Development) Act (RERA) by
then.The Total Investment &
Insurance Solutions
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