IMF projects economic growth for India at 7.3% for FY19

09 Oct '18

3 min read

The International Monetary Fund (IMF) has projected a 7.3 per cent growth rate for India this fiscal and 7.4 per cent in the next in its World Economic Outlook (WEO) report. India’s growth rate in 2017 was 6.7 per cent. This acceleration reflected a rebound from transitory shocks with strengthening investment and robust private consumption, according to IMF.

With a strong medium-term growth prospects of 7.75 per cent because owing to ongoing structural reforms, the projections are slightly lower than those estimated in the April 2018 WEO for 2019, a news agency reported quoting the document released in Bali on October 8 during the annual meeting of the IMF and the World Bank.

If the projections prove right, then India will reclaim the tag of the 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, being ahead of India by 0.2 percentage points.

A high interest burden and risks from rising yields in India 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.

Noting a rising inflation in India, IMF estimated that to be 3.6 per cent in fiscal 2017-18, with a 4.7 per cent projection for fiscal 2018-19, compared with 4.5 per cent in fiscal year 2016-17, amid accelerating demand and rising fuel prices.

IMF’s 2019 growth projection for China is lower than the April one in light of the latest round of US tariffs on Chinese imports.

Growth is projected to moderate from 6.9 per cent in 2017 to 6.6 per cent in 2018 and 6.2 per cent in 2019 in China, implying a slowing external demand growth and necessary financial regulatory tightening, according to the document.

The US growth rate for 2018 is 2.9 per cent and that of 2019 has been powered to 2.5 per cent. The impact of the US-China trade conflict is likely to be felt beyond the two economic superpowers.

Aggregate growth in the emerging market and developing economy group stabilised in the first half of 2018, while emerging Asia continued to register strong growth, supported by a domestic demand-led pick-up in the Indian economy from a four-year-low pace of expansion in 2017. (DS)

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