India’s economic growth in Next Year

India’s economic growth

 India's economic growth may be slowing down, but the country could stage a turnaround to expand by more than 7% next year, according to the latest forecasts by the Asian Development Bank.

In the April-to-June quarter, Asia’s third-largest economy grew 5% year-over-year- a six year low pace. That prompted several economists to warn that the country’s growth rate could fall below 6% this year.

ADB also downgraded its growth projections for India. In a report released Wednesday, the Manila-based development bank said India is expected to grow by 6.5% in the current fiscal year — down from its previous forecast of 7.2%. For the next fiscal year, that growth rate could rebound to 7.2%, slightly lower than the earlier forecast of 7.3%, said ADB (Asian Development Bank).

Economic headwinds remain

The cut in Indian corporate taxes announced last week sent the country’s stock market surging.

At a time when manufacturers based in China are said to be looking for alternative locations to circumvent tariffs due to the trade war, India’s tax cuts could make it more attractive to those companies, said Samir Arora, founder and fund manager at Helios Capital Management.

There have been reports about India targeting the likes of Apples,Foxconn and Wistron as the country tried to reap some benefits from the U.S.-China trade war.

The tax cuts could help India to clinch a deal with tech giant Apple, which “will send a strong to signal” to other companies that the country is a viable alternative location for manufacturing, Arora explained.

Still, some analysts have questioned whether the tax cuts could boost growth enough tp offset the loss in Tax revenue. HSBC economists estimated that the move would increase India’s fiscal deficit to 3.7% of its gross domestic product, higher than the government’s target of 3.3%.