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8 May 2018
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| Growthindia (The Total Investment & Insurance Solutions) |
The
Goods and Services Tax (GST) as well as protracted issues of corporate and bank
balance sheet problems pushed India's economic growth downward in 2017 but a
gradual recovery is expected and the country's economy is forecast to grow at
7.2 percent in 2018, according to a UN report.
According
to estimates in the UN Economic and Social Commission for Asia and the
Pacific's (ESCAP) flagship publication the Economic and Social Survey of Asia
and the Pacific, India's GDP grew at 6.6 percent in 2017, down from 7.1 percent
in 2016. The Total Investment &
Insurance Solutions
The
report said that India's GDP is forecast to grow 7.2 percent in 2018 and 7.4
percent next year. The Total Investment
& Insurance Solutions
In
India, the recently introduced GST as well as weak corporate and bank balance
sheets resulted in modest economic growth, but signs of recovery emerged in the
second half of 2017, it said. The Total
Investment & Insurance Solutions
The
recently introduced Goods and Services Tax (GST) as well as protracted issues
of corporate and bank balance sheet problems pushed the growth rate of India
downward in 2017, it said. The Total
Investment & Insurance Solutions
Developing
Asia-Pacific economies are on track to record an overall growth rate of 5.8
percent in 2017, compared with 5.4 percent the previous year. They are
projected to grow by 5.5 percent in both 2018 and 2019, with a slight
moderation in China offset by a recovery in India and steady performance in the
rest of the region. The Total
Investment & Insurance Solutions
In
India, a gradual recovery is expected; private investment is expected to revive
as the corporate sector adjusts to GST, infrastructure spending increases and
corporate and bank balance sheets improve with government support, the report
said. The Total Investment &
Insurance Solutions
Tax
reform and strengthening tax collection could also add as much as 8 percent to
the gross domestic product (GDP) of countries such as Myanmar or Tajikistan;
and about 3 to 4 percent in larger countries, like China, India or Indonesia,
according to ESCAP. The Total
Investment & Insurance Solutions
Further,
weak corporate and bank balance sheets in India also contributed to a sharp
slowdown in investment; thus, simply lowering policy interest rates was not
enough to revive investment in that country. In India the new bankruptcy code
and the recapitalization package for public sector banks are expected to
support a gradual recovery in private investment.
The
report said that consumption also strengthened in India as the impacts of
demonetisation faded. The Total
Investment & Insurance Solutions
On
the problem of India's bad loans, the report said the share of non-performing
loans in the country has doubled, and defaults on corporate bonds and
syndicated loans have surged in recent years. By mid-2017, distressed bank
loans reached a record high of 9.5 trillion rupees (USD 148 billion), but more
recent revelations suggest that the actual figure may be higher.
The
banking problem is closely related to high corporate leverage; thus, the two
problems are known as the twin balance sheet' challenge. If it does not
effectively address that challenge, India will continue to face weak private
investment and modest economic growth, it said. The Total Investment & Insurance Solutions
While
it has been acknowledged that the GST has reduced the complexity of its
taxation system, its tax laws still are perceived to be second most complex in
the Asia-Pacific region after those of China.
The
report further noted that inflation accelerated in 2017 mainly as a result of
increased food and fuel prices following severe floods in several countries and
rising global oil prices. In India, higher inflation was also due to the
housing rent allowances for civil servants and military staff recommended by
the Seventh Pay Commission. The Total
Investment & Insurance Solutions
With
regard to the medium-term outlook, potential economic growth is on a downward
trend in several countries owing to population ageing, slower capital
accumulation and modest productivity growth, said United Nations
Under-Secretary-General and ESCAP Executive Secretary Shamshad Akhtar.
At
the same time, rapid technological advancements, while promising immense
opportunities are also posing considerable challenges in terms of job
polarization and income and wealth inequalities, Akhtar said.The Total Investment & Insurance
Solutions
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