New Delhi, May 30: India remains the world’s fastest economy and is expected to grow at 7.2 per cent for the financial year 2017-18, predicts the world bank. However, there are many factors including demonetisation, monsoon, the participation of women in the labour force, the Goods and Services tax, that could influence the existing growth rate of the country’s GDP.
The observations were made in the May 2017 edition of the World Bank’s India Development Update report. While the bank praises the Goods and Service tax that is set to be implemented from July 1, it also emphasises that timely and smooth implementation of the new tax network, a new code to deal with bankruptcies, as well as decisive action to resolve the NPA challenge of public sector banks, will play a crucial role in furthering India’s economic strength.
Commenting on the report, World Bank’s Country Director in India, Junaid Ahmad said, “India remains the fastest growing economy in the world and it will get a big boost from its approach to GST which will – reduce the cost of doing business for firms, reduce logistics costs of moving goods across states, while ensuring no loss in equity.”
He added, “Low female labour force participation, however, remains a serious concern. Higher level of women participation in the economy can help propel India closer to double-digit growth.” This issue played a central role in the report’s analysis of the country’s economic weakness.
The Bretton Woods Institution’s assessment pointed out that the Indian growth rate could go up by an entire percentage point if only the country’s female labour participation matched that of countries like Bangladesh and Indonesia. Even Pakistan allowed for greater participation of women in certain types of jobs.
The report particularly states, “In particular, low female LFPR is a drag on GDP growth and an obstacle towards reaching a higher growth path. One estimate suggests GDP growth could accelerate from 7.4 percent currently to over 9 percent if India closed half the female LFPR gap with Nepal. Women are also an untapped source of managerial and entrepreneurial skills. By excluding women, the pool of such talent becomes shallower and growth suffers.”
The World Bank also found that the existing labour laws did not favour the participation of women, particularly in certain types of jobs. The report emphasised the need for jobs that are safe, pay adequately, and offer flexible working hours for women across the country.
The report has also noted that demonetisation did cause a disruption to the economic growth, however, adding that it has the potential to bring about a positive transformation. The report also notes that demonetisation along with a favourable monsoon contributed to moderating food price inflation, which in turn decreased headline inflation while the global commodity prices increased.