The International Monetary Fund (IMF) has lowered India's economic growth estimate for the current financial year to 6.7 per cent from the earlier projection of 7.1 per cent, blaming it on disruptive implementation of the goods and services tax and the lingering effects of last year's demonetisation of high-value notes.
The IMF forecast follows similar lowering of the growth estimates of the country's gross domestic product (GDP) by the Reserve Bank of India (RBI) and the World Bank as well as some private institutions.
In its World Economic Outlook (WEO) report released on Tuesday, the global lender trimmed its projection for economic growth in 2017 to 6.7 per cent from the earlier 7.2 per cent citing government's demonetisation of high value currency and disruption caused by the introduction of goods and services tax (GST).
''The growth projection for 2017 has been revised down… reflecting still lingering disruptions associated with the currency exchange initiative introduced in November 2016, as well as transition costs related to the launch of the national Goods and Services Tax (GST) in July 2017,'' it said in its October 2017 World Economic Outlook.
Earlier, in April, the IMF had pegged India's GDP growth at 7.2 per cent for 2017.
It has also lowered the growth projection for 2018 to 7.4 per cent from its earlier estimate in April and June of 7.7 per cent, which could once again turn India into the fastest growing economy in the world.
IMF, however, was optimistic about medium-term growth prospects for India through gains from the new indirect tax levy.
''GST promises the unification of India's vast domestic market, is among several key structural reforms under implementation that are expected to help push growth above 8 per cent in the medium term,'' it said.
The IMF forecast is in line with a number of recent projections that have scaled down India's growth prospects for the fiscal due to disruptions from demonetisation and GST.
''The downgrade for this year for India looks like a blip. In general, the state of India's economy is quite good,'' said Maurice Obstfeld, IMF Economic Counsellor and Director of Research.
India's GDP growth hit a three-year low of 5.7 per cent in the first quarter of the fiscal. The second volume of the government's Economic Survey also highlighted downside risks to its earlier growth projection of 6.75 per cent to 7.5 per cent for the fiscal.
Recently, the Reserve Bank of India also lowered its growth projection to 6.7 per cent for the fiscal from its earlier estimate of 7.3 per cent.
The economy grew at 7.1 per cent in 2016-17.