The Asian Development Bank's latest global projections has put India’s economic growth a few notches above China’s with the former poised to register a gross domestic product (GDP) of 7.4 per cent in 2016-17 and 7.6 per cent for financial year 2017-2018.

The Asia Development Outlook (ADO) 2017 report released here today, however, said the impact of demonetisation in the wake of Prime Minister Narendra Modi’s note ban initiative last year had only a ‘temporary’ ‘effect’ on the India’s economic growth.

“…ADB notes that the deceleration to 7.1 per cent registered last year was due in part to slower investment growth. Also contributing to the moderation was the impact of the government’s demonetisation of high-value currency notes, though this effect is seen as largely temporary,” an ADB press note stated.

ADB’s Chief Economist Yasuyuki Sawada attributed the recovery in growth rate to an “array of important economic reforms” which he said has propelled India’s economic success in recent years. “A continued commitment to reform ~ especially in the banking sector ~ will help India maintain its status as the world’s fastest growing major economy,” Sawada observed.

The ADB report said the Indian economy riding high on improved agriculture output, foreign direct investment flow and strong domestic demand factors will continue to help India retain its tag as the fastest growing economy of the world. It, however, struck of a note of caution over the likely impact of rising prices of crude in the international market on inflationary trends.

“The ADO expects growth to accelerate through increased consumption, as more new bank notes are put in circulation, and as planned salary and pension hike for state employees are implemented. The public sector will remain the main driver of investment… Exports are forecast to grow by 6 per cent the coming year. Inflation is projected to accelerate to 5.2 per cent in Financial Year 2017 and 5.4 per cent in Financial Year 2018 as the global economy recovers and commodity prices rebound.

“The assessment notes risks from higher oil prices as India imports nearly 80 per cent of its fossil fuel needs. A rapid increase in the price of oil could undermine the country’s fiscal position, stoke inflation, and swell the current account deficit. The report estimates that a $1 increase in oil prices raises the import bill by nearly $2 billion,” according to the ADB’s flagship economic publication here.

About China the ADB’s report maintained that the country’s overall output is expected to slow down to 6.5 per cent in 2017 and 6.2 per cent in 2018, down from the 2016 figure of 6.7 per cent.