New Delhi: The World Bank has released a report projecting India’s growth rate to fall to 6 per cent, noting that the country’s economic growth decelerated for the second consecutive year. In 2018-19, the growth rate stood at 6.9 per cent, down from 7.2 per cent in the financial year 2017-18, news agency PTI reported.

However, the bank in its latest edition of the South Asia Economic Focus said the country was expected to gradually recover to 6.9 per cent in 2021 and 7.2 per cent in 2022.

While industrial output growth increased to 6.9 per cent due to a pick-up in manufacturing and construction activities, the growth in agriculture and the services sector moderated to 2.9 and 7.5 per cent, respectively.

In the first quarter of 2019-20, the economy experienced a significant and broad-based growth deceleration with a sharp decline in private consumption on the demand side and the weakening of growth in both industry and services on the supply side, the report said.

The report also noted that the current account deficit had widened to 2.1 per cent of the GDP in 2018-19 from 1.8 per cent a year before, mostly reflecting a deteriorating trade balance.

On the financing side, significant capital outflows in the first half of the current year were followed by a sharp reversal from October 2018 onwards and a build-up of international reserves to USD 411.9 billion at the end of the fiscal year.

According to the World Bank, poverty has continued to decline, albeit possibly at a slower pace than earlier. Between 2011-12 and 2015-16, the poverty rate declined from 21.6 to 13.4 per cent (USD 1.90 PPP/day).

The report, however, said disruptions brought about by the introduction of the GST and demonetisation, combined with the stress in the rural economy and a high youth unemployment rate in urban areas may have heightened the risks for the poorest households.

The significant slowdown in the first quarter of the fiscal year and high-frequency indicators, thereafter, suggested that the output growth would not exceed 6 per cent for the full fiscal year, the bank said.

The report said the consumption was likely to remain depressed due to slow growth in rural income, domestic demand (as reflected in a sharp drop in sales of automobiles) and credit from non-banking financial companies (NBFCs).

However, the recent cut in the corporate tax rate would bring in investment, the report said.

The overall growth in South Asia has been projected to slow down. Bangladesh and Nepal are, however, estimated to grow faster than India in 2019. Pakistan’s growth rate is projected to deteriorate further to a mere 2.4% this fiscal year.

(With PTI Inputs)