"The Indian economy is likely to recover from the impact of demonetisation and the GST, and growth should revert slowly to a level consistent with its proximate factors - that is, to about 7.5 per cent a year", the World Bank report had said.
The World Bank forecasts India's economic growth will accelerate to 7.3% in 2018-19, from 6.7% in the current financial year, before gathering momentum to a 7.5% pace in 2019-20.
For the current financial year ending on March 31, the Washington-based multi-lateral funding agency has projected the economy to grow at 6.7 percent.
He said the bank planned to lend $20 billion to $25 billion to India in the next five years, mainly for investment in infrastructure, human resources and natural resources management, to support inclusive economic growth. "India's GDP growth saw a temporary dip in the last two quarters of 2016-17 and the first quarter of 2017-18 due to demonetisation and disruptions surrounding the initial implementation of GST (Goods and Services Tax)", World Bank said in its India Development Update.
Sustaining a growth rate higher than 7.5%, and reaching an aspirational growth rate of 8% or higher will require contributions from all domestic sectors and support from the global economy, the World Bank said.
Besides pointing to enhanced macroeconomic stability on sectoral growth, the report says that services will continue to be the main driver of economic growth; agricultural growth has become more stable with slow acceleration and industrial growth has seen some acceleration.
The bank has also indicated that the GST is one of the most complex tax systems and has the second highest tax rate in the world among a sample of 115 countries which have a similar indirect tax system.More news: Ravens sign WR Michael Crabtree to three-year deal
It appreciated the impact of GST on formalisation of the economy and for making economic growth sustainable.
"This episode benefited from the combined effect of important reforms undertaken in the 1990s and early 2000s and from an unusual buoyancy in the global economy and easy global liquidity, leading to high sustained growth across sectors and all components of GDP", the bank said.
The multilateral lending institution said decisive reforms will be needed to enable the Indian banking sector to help finance India's growth aspirations.
"This will require continued impetus for structural reforms", Ms. Gupta added.
The report has also noted that while oil prices pose less of a risk for the economy, the expected normalisation of the monetary policy by the U.S. and other advanced economies are likely to tighten financing conditions.
While terming the Goods and Services Tax (GST) as a "historic reform", the report, however, said that tax rates in India's GST system are among the highest in the world. While oil prices pose less of a risk for the Indian economy, the expected normalization of monetary policy by the United States and other advanced economies are likely to tighten financing conditions.