India’s real GDP growth likely to average 7.75 pct y/y in 2017-2018, says Scotiabank

Outlook of the Indian economy is rebounding as it rebounds from the temporary cash shortage following the government’s currency exchange initiative at the end of last year. The real GDP growth of India is expected to average 7.75 percent year-on-year in 2017-2018, according to a Scotiabank research report. This follows a 7.6 percent growth recorded last year. Amongst the global major economies, India is expected to be a growth outperformer.

Momentum is expected to be driven by domestic demand, especially household spending, on back of the country’s swiftly growing middle class and rising disposable incomes. The prospects for private-sector investment are rebounding after implementation of key reforms, yet additional progress on improving the business environment is required in the quarters ahead.

Meanwhile, the country’s inflationary pressures are expected to remain restricted, in spite of a likely modest rise in the headline rate from the 3.8 percent year-on-year level seen in March. Price gains are expected stay within the central bank’s inflation target of 4 percent, plus or minus 2 percent year-on-year through next year, added Scotiabank.

According to the India Meteorological Department, the southwest monsoon’s rainfall is expected to be within the “normal” category that will underpin India’s agricultural sector and contain food price inflation. The Reserve Bank of India is expected to keep the repo rate on hold at 6.25 percent in the months ahead. The central bank had underlined that its monetary policy stance stays neutral, but it hiked the reverse repo rate by 25 basis points to 6 percent.