India Eight percent

A banker counts rupee notes in November 2016, in the wake of the demonetization of old 500 and 1000 rupee notes. After recovering from demonetization difficulties, India’s economy is expected to grow by nearly eight percent in the next year. (Indranil Mukherjee/AFP/Getty Images)

UNITED NATIONS — Recovering from demonetization stumbles, India's economic growth next year is expected to almost touch the 8 percent mark, rebounding to 7.9 percent with the help of sound monetary policies and a boost from reforms, the U.N. said May 16.

The mid-2017 update to the U.N. World Economic Situation and Prospects report raised the figure by 0.3 percent from 7.6 percent projected at the beginning of this year.

"Despite temporary disruptions from the demonetization policy, economic conditions in India remain robust, underpinned by sound fiscal and monetary policies and the implementation of key domestic reforms," the report said.

However, for the current year, the report by the U.N. Department of Economic and Social Affairs cut the growth rate by 0.4 percent to only 7.3 percent, down from the 7.7 percent it forecast in January.

Last year's growth rate was 7 percent, the report said.

India is expected to keep its lead as the world's fastest growing major economy in a world struggling to reach a 2.9 growth next year with the developed economies stuck at 1.8 percent.

UNDESA, however, also warned that the "stressed balance sheets in the banking and corporate sectors will prevent a strong investment rebound in the near term" in India.

Next year's 7.9 percent growth estimate for India is higher than the recent projections by other recent reports. Last month the International Monetary Fund forecast the growth rate to be 7.7 percent during 2018-9.

The U.N. Economic and Social Council for Asia and the Pacific 2017 survey last month said it expected India's economy to grow by 7.5 percent next year.

For the current fiscal year, the IMF's growth projection for India is 7.2 percent. ESCAP pegged this year's growth at 7.1 percent.

The report said that a cloud of uncertainty hung over the world economy. Faster than expected interest rate hikes by the U.S. could set off capital outflows affecting emerging economies, it said.

Heightened uncertainty over international policy could hinder a strong rebound in private investment globally, it added.

Lenni Montiel, the assistant secretary-general for Economic Development, said in a statement releasing the report that there was a "need to reinvigorate global commitments to international policy coordination to achieve a balanced and sustained revival of global growth, ensuring that no regions are left behind."

On a positive note, the report said that global economic growth has strengthened in the last six months.

"Helped by a moderate recovery in trade and investment, world gross product is expected to expand by 2.7 percent in 2017 and 2.9 percent in 2018," it said. "While this marks a notable acceleration compared to 2016, growth in many regions remains below the levels needed for rapid progress towards achieving the Sustainable Development Goals" set by the U.N. for eradicating poverty.

China has the second highest projected growth rate – 6.5 percent for this year and the next. The east African region follows with a 6.5 percent estimate for next year.

The U.S. growth rate is projected to be flat at 2.1 percent this next year and the next, up from 1.6 percent last year. The European Union estimates are 1.7 percent this year and the next, down from last year's 1.9 percent.

(Arul Louis can be reached at arul.l@ians.in)

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