IMF predicts India's growth at 7.3% in 2018, 7.4% next-year
India is projected to grow at 7.3% in 2018 and 7.4% next year, the IMF said today, predicting that the country will regain the tag of the world's fastest growing major economy this year. 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.
IMF says growth due to important reforms in India
In 2017, India had clocked a 6.7% growth rate. In India, important reforms have been implemented in 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 making it easier to do business, the International Monetary Fund (IMF) said in its World Economic Outlook (WEO) report in April.
India can surpass China's economy by over 0.7% points
India's medium-term growth prospects remain strong at 7%, benefiting from the ongoing structural reforms, but have been marked down by just under a half percentage point relative to the April'18 WEO. If projections are true, then India would regain the tag of the fastest-growing major economy of the world, crossing China with over 0.7% points in 2018 and an impressive 1.2% growth-lead in 2019.
China was the fastest growing economy in 2017
China was the fastest growing economy in 2017 as it was ahead of India by 0.2% 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.
China-US trade war impacting economy growth of China
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, it said.
China's economic growth expected to slow to 5.6%
Over the medium term, China's economic 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. "Owing to these changes, our international growth projections for 2018 and 2019 are downgraded to 3.7%, 0.2% point below our last assessments and the same rate achieved in 2017," the report said.
Growth rate for US is 2.9% in 2019
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 labor and land markets, along with further improvements to the business climate are also crucial (in India)," the report said.
Reform priorities: Reviving bank credit, improve public sector bank governance
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. In India, a high interest burden and risks from rising yields require continued focus on debt reduction to establish policy credibility and build buffers.
India: Inflation on the rise amid rising fuel prices
"These efforts should be supported by further reductions in subsidies and enhanced compliance with the Goods and Services Tax," the IMF report said. It also said inflation in India is on the rise, estimated at 3.6% in fiscal year 2017/18 and projected at 4.7% in fiscal year 2018/19, compared to 4.5% in fiscal year 2016/17, amid accelerating demand and rising fuel prices.
Aggregate growth in emerging market stabilized in 2018 first half
The report said that aggregate growth in the emerging market and developing economy group stabilized in the first-half of 2018. Emerging Asia continued to register strong growth, supported by a domestic demand-led pickup in the Indian economy from a four-year-low pace of expansion in 2017, even as activity in China moderated in the second quarter in response to regulatory tightening of the property sector.
