The Narendra Modi-led government got a big boost on the eve of Prime Minister’s address to a global audience at Davos, as the IMF said that India could grow at 7.4% in 2018, as against China’s 6.8 per cent, making it the fastest growing country among emerging economies following last year’s slowdown due to demonetisation and the implementation of the GST. Notably, the International Monetary Fund has projected a 7.8 per cent growth rate for India in 2019. Growth rate projections for both 2018 and 2019 remains unchanged since its October 2017 World Economic Outlook projections. China, during the same period is expected to grow at 6.6 per cent and 6.4 per cent respectively, the IMF said.
India may become fastest growing among EMs
With this forecast coming in, India may come out shining as the fastest growing emerging market in the world. In the year gone by, China’s economy grew at 6.8 per cent and was ahead of India, which grew at 6.7 per cent, giving China the tag of being the fastest growing emerging economy, as has been the case for major parts of the past several decades. Due to structural reform such as GST and demonetisation, India’s growth rate dropped to 6.7 per cent in 2017.
“In all likelihood India is going to register higher growth rate than other major emerging market economies in the next decade. So, I wouldn’t focus on the short-term numbers. I would look at the big picture for India and big picture is telling us that it has enormous potential,” Ayhan Kose, Director, Development Prospects Group, World Bank, told PTI in an interview.
Cyclical upswing provides opportunity for reforms
Interestingly, while India’s prospects remina bright, IMF says that the global economy is expected to grow 3.9% this year, faster than 3.7% forecast earlier in October. Further, the IMF observed, “Some 120 economies, accounting for three quarters of world GDP, have seen a pickup in growth in year-on-year terms in 2017, the broadest synchronised global growth upsurge since 2010,” the IMF said. The body has also revised global growth forecast upward. “Global growth forecasts for 2018 and 2019 have been revised upward by 0.2 percentage point to 3.9%,” the IMF said. “The revision reflects increased global growth momentum and the expected impact of the recently approved US tax policy changes.” IMF says the cyclical upswing provides an ideal opportunity for reforms. “Shared priorities across all economies include implementing structural reforms to boost potential output and making growth more inclusive,” the IMF said.
Caution on complacency
IMF chief Christine Lagarde cautioned world leaders against being complacent about economic growth and expressed concern that some developing economies are not sharing the benefits of their growth. “While the near-term outlook is good, the mid-term outlook is more worrying, and a recession may be nearer than we think,” she said while releasing an update to the IMF’s
global economic outlook here at the World Economic Forum. IMF director of research Maurice Obstfeld sounded a note of caution. “As the year 2018 begins, the world economy is gathering speed,” he said. “This is good news. But political leaders and policymakers must stay mindful that the present economic momentum reflects a confluence of factors that is unlikely to last for long.”