SME Times News Bureau | 09 Apr, 2019
The Indian economy will expand at a rate of 7.3 per cent
this fiscal year thereby retaining its record as the world's fastest-growing
major economy, according to the International Monetary Fund (IMF)'s World
Economic Outlook report released on Tuesday.
The outlook report said that India's growth is "supported by the continued
recovery of investment and robust consumption amid a more expansionary stance
of monetary policy and some expected impetus from fiscal policy".
The IMF had cut the growth projection for this year by 0.2 per cent from the
7.5 per cent made in January, but still it is higher than last year's growth of
7.1 per cent and is projected to increase to 7.5 per cent next year, though
lower than the earlier 7.7 projection.
The Outlook said the cuts reflect "the recent revision to the national
account statistics that indicated somewhat softer underlying momentum".
Over the medium term, India's growth is expected to stabilise at just under
7.75 per cent "based on continued implementation of structural reforms and
easing of infrastructure bottlenecks", it said.
The report noted that "important steps have been taken to strengthen
financial sector balance sheets, including through accelerated resolution of
nonperforming assets under a simplified bankruptcy framework".
India, however, remains a bright spot in a global economy, whose growth is
expected to be only 3.3 per cent this year, down from last year's 3.6 per cent,
but expected to reach that figure next year.
The IMF growth figures for India are slightly higher than those of the Asian
Development Bank (ADB)'s outlook report released last Wednesday.
The ADB said that India's growth will tick up from 7 per cent last year to 7.2
per cent this year and 7.3 per cent next year fuelled by stronger consumption.
"The recovery in agriculture and stronger domestic demand, with reform
having strengthened the health of banks and corporations" and the domestic
firms and products becoming more competitive following the implementation of a
value-added tax, will all help the growth, it said.
According to the IMF's outlook report, China is on a low growth trajectory as
its economy matures: it grew by 6.6 per cent last year and is projected to slow
down to 6.3 per cent this year and 6.1 next year.
The United States grew by 2.9 per cent last year and is projected to slow down
to 2.3 this year and 1.9 next year, the report said.
Fast-growing economies like India and China support the aggregate growth for
the world in addition to emerging markets and developing economies, it noted
The report said: "Following a broad-based upswing in cyclical growth that
lasted nearly two years, the global economic expansion decelerated in the
second-half of 2018".
It blamed the slowdown on the trade spat and tariff hikes between the US and
China, besides "a decline in business confidence, a tightening of
financial conditions, and higher policy uncertainty across many
economies".
The IMF said that to secure its growth prospects, it is essential that India
continues to implement structural and financial sector reforms and makes an
effort to reduce public debt through continued fiscal consolidation.
One of the suggestions it made to reduce public debt is to further reduce
subsidies, which may not be politically palatable.
Other suggestions for India in the outlook include improving the governance of
public sector banks; reforms to hiring and dismissal regulations to incentivise
job creation and absorb the country's large demographic dividend; and land
reform to facilitate and expedite infrastructure development.
Consumer prices in India increased by 3.5 per cent last year and is projected
to increase by 3.9 per cent this year and 4.2 per cent next year, it said.
On the foreign exchange front, current account balance has fallen by 2.5 per
cent, and is projected to go down by 2.5 per cent this year and 2.4 per cent
next year.