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Global growth may lift Indian economy in fiscal 2019: Crisil
Jan-17-2018

Coming out of the hiccups of demonetization and Goods and Services Tax (GST) regime, India is expected to benefit from stronger global growth in the next fiscal year.  Credit rating agency, Crisil in its latest report ‘Riders to the ride’ has said that those headwinds are now past and in fiscal 2019, the weak-base effect of this fiscal and fast global growth may lift Indian economy.

As per the report, though the country could not join the global rally in 2017 due to note ban and GST, global growth momentum and continuing efforts to address GST-led disruptions are expected to improve trade prospects for India in 2018 and its labour-intensive sectors which were most hit by the disruption.

It pointed that India's export led sectors like leather, textiles and gems and jewellery which were already reeling from the demonetisation were hit further after GST which was implemented in July and said that India's export growth during April-October 2017 at 9.5% appears sedate compared with Vietnam's 23.8%, South Korea's 18.4%, and Indonesia's 17.8%, but it added that as global growth momentum is expected to continue in 2018 it means India's exports may have a chance for a comeback provided there are no further domestic disruptions.

However, the rating agency noted that risks like lingering impact of domestic disruptions, asymmetry in monetary policies of advanced economies and spike in crude prices may restrict the country to join global growth party in 2018 too. Crisil further noted that divergent monetary policies and the consequent widening of the interest rate differential between the US and Europe will mean capital flowing into the US and further strengthening of the dollar and this will also impact capital flows into India, particularly foreign portfolio investments in bonds. The report also said that rising crude oil prices will widen the country's current account deficit and make it difficult for the government to raise taxes.

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