IMF projects India’s growth at 7.3% in 2018, 7.4% next year
POSITIVE OUTLOOK India to surpass China to regain world’s fastest growing major economy tag: IMF WASHINGTON:
India is projected to grow at 7.3% in 2018 and 7.4% next year, the IMF said Tuesday, predicting that the country will regain the tag of the world’s fastest growing major economy this year, surpassing China with more than 0.7 percentage points.
In 2017, India had clocked a 6.7% growth rate.
In India, important reforms have been implemented in the recent years, including the Goods and Services Tax (GST), the inflation-targeting framework, the Insolvency and Bankruptcy Code, and steps to liberalize foreign investment and make it easier to do business, the International Monetary Fund (IMF) said in its latest World Economic Outlook (WEO) report.
“India’s growth is expected to increase to 7.3% in 2018 and 7.4% in 2019 (slightly lower than in the April 2018 World Economic Outlook (WEO) for 2019, given the recent increase in oil prices and the tightening of global financial conditions), up from 6.7% in 2017,” it said in the WEO report.
This acceleration, the world body said, reflected a rebound from transitory shocks (the currency exchange initiative and implementation of the GST), with strengthening investment and robust private consumption.
India’s medium-term growth prospects remain strong at 7¾%, benefiting from the ongoing structural reforms, but have been marked down by just under a half percentage point relative to the April 2018 WEO, it said.
If projections are true, then India would regain the tag of the fastest growing major economy of the world, crossing China with more than 0.7 percentage points in 2018 and an impressive 1.2 percentage point growth lead in 2019.
China was the fastest growing economy in 2017 as it was ahead of India by 0.2 percentage points. For the record, the IMF has lowered the growth projections for both India and China by 0.4% and 0.32%, respectively, from its annual April’s WEO.
Released in Bali during the annual meeting of the IMF and the World Bank, the IMF’s flagship WEO said its 2019 growth projection for China is lower than in April, given the latest round of US tariffs on Chinese imports, as are its projections for India.
In China, growth is projected to moderate from 6.9% in 2017 to 6.6% in 2018 and 6.2% in 2019, reflecting a slowing external demand growth and necessary financial regulatory tightening, the report said. The 0.2 percentage point downgrade to the 2019 growth forecast is attributable to the negative effect of recent tariff actions, assumed to be partially offset by policy stimulus, it said.
Over the medium term, growth is expected to gradually slow to 5.6% as the economy continues to make the transition to a more sustainable growth path with continued financial de-risking and environmental controls, it noted.
“Owing to these changes, our international growth projections for both this year and next are downgraded to 3.7%, 0.2 percentage point below our last assessments and the same rate achieved in 2017,” the report said.
The growth rate of the US for 2018 is 2.9% and that of 2019 has been powered to 2.5%.
“Looking ahead, renewed impetus to reform labour and land markets, along with further improvements to the business climate are also crucial (in India),” itsaid.
According to the WEO, in India, reform priorities include reviving bank credit and enhancing the efficiency of credit provision by accelerating the cleanup of bank and corporate balance sheets and improving the governance of public sector banks.