After demonetisation, GST is likely to badly hit India's informal sector: UN report

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New Delhi, Sep 15: Is the Indian economy in doldrums? A report prepared by the United Nations (UN) gives some scary news as how after demonetisation, the Goods and Services Tax (GST) is likely to badly affect India's informal sector.

The UN report lowered the country's growth projections to 6.7 per cent for 2017 from 7 per cent in 2016.


The United Nations Conference on Trade and Development's (UNCTAD) 2017 report notes that the world economy in 2017 is picking up but not lifting off. The growth is expected to reach 2.6 per cent, slightly higher than in 2016 but well below the pre-financial crisis average of 3.2 per cent.

Referring to India and China, it said at the current levels of growth, the countries are unlikely to serve as "growth polls" for the global economy in near future.

India's "output growth" is likely to slowdown to 6.7 per cent in 2017 from 7 per cent in the previous year, it said. The report retained the growth projection for China at 6.7 per cent, the same as 2016.

India's growth performance, it said, depends to a large extent on reforms to its banking sector, which is burdened with large volumes of stressed and non-performing assets, and there are already signs of a reduction in the pace of credit creation.

Indian banks are saddled with non-performing assets of about Rs 8 lakh crore.

Since debt-financed private investment and consumption have been important drivers of growth in India, the easing of the credit boom is likely to slow GDP growth, it said.

"In addition, the informal sector, which still accounts for at least one-third of the country's GDP and more than four-fifths of employment, was badly affected by the government's 'demonetisation' move in November 2016, and it may be further affected by the rollout of the GST from July 2017," it said.

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