IMF predicts 7.3% growth for India in 2018, praises GST, bankruptcy code
Washington, Oct 9: The International Monetary Fund (IMF) on Tuesday forecast a growth rate of 7.3 percent for India in the current year of 2018 and that of 7.4 percent in 2019. In 2017, India had clocked a 6.7 percent growth rate.
"India's growth is expected to increase to 7.3 percent in 2018 and to 7.4 percent 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 percent in 2017," the IMF said in its latest World Economic Outlook report.
IMF praises GST for growth
This acceleration, the world body said, reflected a rebound from transitory shocks (the currency exchange initiative and implementation of the national Goods and Services Tax), with strengthening investment and robust private consumption.
India's medium-term growth prospects remain strong at 7¾ percent, benefiting from ongoing structural reform, but have been marked down by just under ½ percentage point relative to the April 2018 WEO, it said.
India may surpass China
If projections are true, then India would regain the tag of fastest growing major economies of the world, crossing China with more than 0.7 percentage point 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 percent and 0.32 percent, respectively, from its annual April's World Economic Outlook.
Released in Bali during the annual meeting of the IMF and the World Bank, the IMF's flagship World Economic Outlook 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 percent in 2017 to 6.6 percent in 2018 and 6.2 percent 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.
In India, the report said, important reforms have been implemented in the recent years, including the Goods and Services Tax, the inflation-targeting framework, the Insolvency and Bankruptcy Code, and steps to liberalise foreign investment and make it easier to do business.
"Looking ahead, renewed impetus to reform labour and land markets, along with further improvements to the business climate, are also crucial," it said.
According to the World Economic Outlook, 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.
"These efforts should be supported by further reductions in subsidies and enhanced compliance with the Goods and Services Tax," the IMF report said.
Inflation in fiscal year 2018-19
It also said inflation in India is on the rise, estimated at 3.6 per cent in fiscal year 2017/18 and projected at 4.7 per cent in fiscal year 2018/19, compared with 4.5 per cent in fiscal year 2016/17, amid accelerating demand and rising fuel prices.
The report said that aggregate growth in the emerging market and developing economy group stabilised in the first half of 2018.
OneIndia News (With PTI inputs)