Goldman Sachs has forecast a deceleration in India’s GDP growth to 6.8 per cent this fiscal, down from 7.6 per cent last financial year, due to demonetisation of Rs 500 and Rs 1000 currency notes. According to the global financial services major, post the ‘dramatic currency reform’ the liquidity shortage would be a significant constraint on domestic activity, which in turn would affect GDP growth.
According to the report, the “large, young, lower-income” economies of India, Indonesia, and the Philippines have higher growth potential — in theory. But in practice, much will depend on domestic policy and the pace of economic reform. Other key reforms in 2016 include the approval of goods & services tax (GST) structure, passing of the new bankruptcy code, formation of the Reserve Bank’s monetary policy committee and formalisation of inflation target framework.