The temporary disruptions (primarily to private consumption) caused by cash shortages accompanying the currency exchange initiative are expected to gradually dissipate in 2017 as cash shortages ease, the International Monetary Fund said in its regional economic outlook.
India’s growth is expected to rebound to 7.2 per cent in the 2017–18 fiscal and 7.7 per cent in 2018-19 after disruptions caused by demonetisation, the IMF said today, while recommending the removal of long-standing structural bottlenecks to enhance market efficiency.
“In India, growth is projected to rebound to 7.2 per cent in FY2017–18 and further to 7.7 per cent in FY2018–19,” the IMF said.
“Headwinds from weaknesses in India’s bank and corporate balance sheets will also weigh on near-term credit growth. Confidence and policy credibility gains, including from continued fiscal consolidation and anti-inflationary monetary policy, continue to underpin macroeconomic stability,” -IMF.
According to the report, in India, improving productivity in the agriculture sector, which is the most labour-intensive sector and employs about half of Indian workers, remains a key challenge.