The World Bank on Wednesday released a report that predicted India's GDP growth at 7.3% in 2018-19 and 7.5% in 2019-20.
The Economic Survey tabled in Parliament has projected a growth rate of 7 to 7.5 per cent in FY 2018-19.
The Central Statistics Office has projected GDP growth for the 12 months ending March 31, at 6.6%.
He said the bank planned to lend $20 billion to $25 billion to India in the next five years, mainly for investment in infrastructure, human resources and natural resources management, to support inclusive economic growth.
"India's GDP growth saw a temporary dip in the last two quarters of 2016-17 and the first quarter of 2017-18 because of demonetisation and disruptions surrounding the initial implementation of GST", the World Bank said in its India development update. For 2017-18, the growth rate is estimated to be 6.7 per cent.
"While services will continue to remain the main driver of economic growth, industrial activity is poised to grow, with manufacturing expected to accelerate following the implementation of the GST, and agriculture will likely grow at its long-term average growth rate", it said. Though India's exports have picked up of late, the growth rate has lagged behind that for world exports since the 2008 financial crisis, a fact reflected in India's stagnant or declining share in world exports.
Despite the recent momentum, attaining a growth rate of 8 percent and higher on a sustained basis will require addressing several structural challenges.
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The bank has also indicated that the GST is one of the most complex tax systems and has the second highest tax rate in the world among a sample of 115 countries which have a similar indirect tax system.
Poonam Gupta, the lead economist and the main author of the report, said that durable revival in private investments and exports would be crucial for India achieving a sustained high growth of 8 percent and above.
"Going forward, de-risking the private sector may be important, as it may be to ensure an environment of policy certainty", the report added.
"In some of these episodes, high growth was due to a low base impact of slow growth in the previous year followed by an unusually good agricultural output (1976, 1989); in others, it was an outcome of unsustainable fiscal or other macroeconomic policy (such as 2010-11)", the report said. However, the government's plan of infusing capital into public sector banks could reinvigorate bank credit.
"We expect inflation to hover a bit below 5% in 2018 and 2019, in the upper band of the Reserve Bank of India's (RBI) target", it said.
"In addition, reforms to land, labour and financial markets are needed to assure the continued competitive supply and use of key production inputs, such as labour, land, finance, and skills", it added. While oil prices pose less of a risk for the Indian economy, the expected normalization of monetary policy by the USA and other advanced economies are likely to tighten financing conditions.