New Delhi: The Asian Development Bank (ADB) on Thursday said that India's growth rate will improve to 7.4 percent during 2017-18 and go up further to 7.6 percent in the next fiscal, remaining ahead of China.


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"The impact of the demonetisation of high-value banknotes is dissipating as the replacement banknotes enter circulation. Stronger consumption and fiscal reforms are also expected to improve business confidence and investment prospects in the country," said the Asian Development Outlook, ADB's flagship economic publication.


India recorded a growth rate of 7.1 percent during 2016-17, notwithstanding the fears that demonetisation of high-value currency notes of Rs 500/1,000 in November last year would adversely impact the economic growth.


"In India, the sub-region's largest economy, growth is expected to pick up to 7.4 percent in fiscal year (2017-18) and 7.6 percent in 2018-19, following the 7.1 percent registered last FY," it said.


With regard to China, the report said, the overall output is expected to slow to 6.5 percent in 2017 and 6.2 percent in 2018, down from 2016's 6.7 percent.


Efforts of the Chinese government to maintain financial and fiscal stability would continue to be a modest drag on growth going forward, it said, adding the continued structural reform would help in maintain growth in the government's target range.


Over the last few years, India has taken a host of economic reforms initiative, including the Goods and Services Tax (GST) and liberalisation of the FDI regime, with a view to improve business climate and promote growth. The GST is expected to roll out from July.


The report further said that South Asia would remain the fastest growing of all subregions, with growth reaching 7 percent in 2017 and 7.2 percent in 2018.


Commenting on the future prospects, it said that in two-thirds of economies in developing Asia, the growth is being supported by higher external demand, rebounding global commodity prices, and domestic reforms, making the region the largest single contributor to global growth at 60 percent.