India loses fastest growth tag to China, thanks to GST, ‘notebandi’
The International Monetary Fund has slightly raised its projection for economic growth of major economies, but it has drastically scaled down the one for India.
It has lowered India's growth projection to 6.7 per cent in 2017, 0.5 percentage points less than its previous two forecasts and slower than China's 6.8 per cent, attributing it to demonetisation and introduction of the GST.
The International Monetary Fund raised its current year growth forecast for China to 6.8 per cent, 0.1 percentage more than its two previous projections in April and July -pushing the Communist giant above India at the top of the global growth tally. It also lowered India's growth for 2018 to 7.4 per cent, 0.3 percentage points less than its previous two projections in July and April. India's growth rate in 2016 was 7.1 per cent, which saw an upward revision of 0.3 percentage points from its April report.
"In India, growth momentum slowed, reflecting the lingering impact of the authorities' currency exchange initiative as well as uncertainty related to the midyear introduction of the country-wide Goods and Services Tax," the IMF said in its latest World Economic Outlook report.
Hit hard by demonetisation, India lost the tag of the fastest growing economy to China in the March quarter with a GDP growth of 6.1 per cent, as per the data released by the Indian government's Central Statistics Office (CSO). However, India is likely to regain the tag of the fastest growth among emerging economies of the world in 2018, with China projected to grow at 6.5 per cent in 2018, the IMF said. The GST, which promises the unification of India's vast domestic market, is among several key structural reforms under implementation that are expected to help push growth above eight per cent in the medium term, the report said.
"In India, simplifying and easing labour market regulations and land acquisition procedures are long-standing requirements for improving the business climate," the report added.