India may cross China as fastest growing economy in 2018: IMF

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The International Monetary Fund (IMF) on Tuesday forecast a growth rate of 7.3 per cent for India in the current year of 2018 and that of 7.4 per cent in 2019. In 2017, India had clocked a 6.7 per cent growth rate.

“India’s growth is expected to increase to 7.3per cent in 2018 and to 7.4per cent 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 6.7per cent in 2017,” the IMF said in its latest World Economic Outlook report.

India’s medium-term growth prospects remain strong at 7¾ per cent, benefiting from ongoing structural reform, but have been marked down by just under ½ percentage point relative to the April 2018 WEO, it said.

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 per cent and 0.32 per cent, respectively, from its annual April’s World Economic Outlook.

IMF has projected India’s growth to recover to 7.4% in FY2018-19 from an estimated 6.7% in FY2017-18, a tad higher than 6.6% estimated by government’s statistics body, thus “making India once again one of the region’s fastest-growing economies”.

“The recovery is expected to be underpinned by a rebound from transitory shocks as well as robust private consumption,” IMF said.

IMF said India’s medium-term growth prospects remain positive, benefiting from key structural reforms, including the GST reform. “The current account deficit in FY2017/18 is expected to widen somewhat but should remain modest, financed by robust foreign direct investment inflows,” it added.

In its bi-annual World Economic Outlook released last month, IMF said India should address labour market rigidities to create more jobs and undertake financial sector reforms to improve governance in public sector banks to contain downside risks to its medium-term growth prospects.

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