Despite short-term hiccups, India will remain worlds most dynamic emerging economies: ADB

While the country is going through economic turbulence, Asian Development Bank report called it as "short-term hiccups".

India's growth moderated due to lingering effects from demonetisation and transitory challenges related to the new goods and services tax (GST) regime. 

Gross domestic product (GDP) plunged to three years low in the first quarter of FY17 to 5.7%. 

ADB in its report said that the forecast for the rest of FY2017 will be more bullish as private consumption is expected to pick up on the back of low inflation and anticipated wage hikes. 

Yasuyuki Sawada, ADB Chief Economist, in its report said, "India’s ambitious reform agenda will lead to higher long-run growth for its economy. Despite the short-term hiccups as firms adapt to the national GST, we believe that continued reform progress will help India remain one of the world’s most dynamic emerging economies.”

ADB forecasts growth to reach 7% for FY2017, a 0.4% point decline from the April estimates, while the outlook for FY2018 is now at 7.4% from the previous 7.6% projection.

On the other hand, the report in its report mentioned that Inflation is expected to average 4% in FY2017 and 4.6% in FY2018, significantly lower than the previous estimates of 5.2% and 5.4%, respectively.

Moreover, the report said that manufacturing is also likely to bounce back as the sector adjusts to the new tax regime, while services will remain robust as trade and transport services revive with the easing of cash constraints. 

Further, India's fiscal deficit at the end of March 31, 2017 stood at 3.5%. ADB in its report said that Indian policymakers to meet the fiscal deficit target in FY2017, despite the presence of some risks in the form of lower non-tax revenue and a slow start to the disinvestment of public sector enterprises. 

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