GST, bank balance sheet problems pushed India’s economic growth downward: UN report

The UN Economic and Social Commission for Asia and the Pacific (ESCAP) on May 8, 2018 released the 2018 Economic and Social Survey of Asia and the Pacific.

As per the UN report, India’s economic growth was pushed downward in 2017 due to the implementation of the Goods and Services Tax (GST) as well as due to issues such as bank balance sheet problems. Moreover, these factors led to the decline in India’s GDP in 2017 to 6.6 percent, from 7.1 percent in 2016.

The report indicates that the country is expected to recover gradually and grow at 7.2 percent in 2018 and 7.4 percent in 2019.

Key highlights of the report

• Developing Asia-Pacific economies are expected to record an overall growth rate of 5.8 percent in 2017, compared to 5.4 percent in 2017. These economies will grow by 5.5 percent in both 2018 and 2019.

• Private investment is expected to perk up as the corporate sector has adapted itself to GST and bank balance sheets improve with the government support.

• Tax reforms could also add up to 8 percent to the gross domestic product (GDP) of countries such as Myanmar and Tajikistan and about 3 to 4 percent in countries like China, India and Indonesia.

• The new bankruptcy code and the recapitalisation plan for public sector banks are expected to support a gradual recovery in private investment.

• The consumption strengthened during the end of 2017, as the impacts of demonetisation started to fade.

• However, share of non-performing loans in the country has doubled and defaults on corporate bonds and syndicated loans surged in recent years.

• Though the GST has reduced the complexity of its taxation system, its tax system is still perceived to be second most complex in the Asia-Pacific region, after that of China.