China Current Affairs

India expected to grow at 7.4% in 2018: IMF

The International Monetary Fund (IMF) in its latest World Economic Outlook (WEO) has projected India to grow at 7.4% in 2018 and 7.8% in 2019. It also held that India will again emerge as world’s fastest-growing major economy at least for the next two years (2019 and 2020).

Key Facts

India’s growth: Over the medium term, India’s growth will gradually rise with continued implementation of structural reforms that will raise productivity and incentivise private investment. It will be driven by recovery from transitory effects of currency exchange initiative and implementation of national GST tax and supported by strong private consumption growth. India’s progress on structural reforms in recent past, including through implementation of GST will help reduce internal barriers to trade, increase efficiency and improve tax compliance.

China’s Growth: Its expansion will slow to 6.6% and 6.4% for 2018 and 2019, respectively, against 6.9% in 2017. China, with 6.9% growth, jumped marginally ahead of India in 2017.

Global Growth: It is seen stable at 3.9% over current and next calendar years, almost unchanged from 3.6% in 2018, despite a looming trade war between the US and China. The risks from inward-looking policies of some countries to trade prospects and trade war may not spiral out of control, plunging world into broader crisis

Challenges to India’s growth: Though India’s medium-term growth outlook for India is strong, important challenge to it is to enhance inclusiveness. Moreover, India’s high public debt and recent failure to achieve  budget’s deficit target, calls for continued fiscal consolidation into medium term to further strengthen fiscal policy credibility. Moreover, it should also ease labour market rigidities, reduce infrastructure bottlenecks, and improve educational outcomes for lifting constraints on job creation and ensuring that demographic dividend is not wasted.


India’s economy to grow 7.3% in 2018-19 and 7.6% in 2019-20: ADB Outlook

The Asian Development Outlook 2018 released by Asian Development Bank (ADB) has projected India’s economic growth to 7.3% in 2018-19 fiscal and further to 7.6% in 2019-20 fiscal. The ADB’s growth projection is in line with that of rating agency Fitch, but is lower than Reserve Bank of India’s (RBI) forecast of 7.4%.

Asian Development Outlook 2018

India’s growth Projection: Indian growth is expected to pick up to 7.3% in fiscal year (FY) 2018 and 7.6% in FY2019, following the estimated 6.6% in FY2017. India will remain the world’s fastest growing major economy.

India’s growth will pick up with increased productivity post Goods and Services Tax (GST) and investment revival due to banking reform and corporate deleveraging take hold to reverse downtrend in investment.

The impact of demonetization of high-value banknotes has dissipated and full implementation of GST will bolster growth in India in 2019.

Indian economy grew 6.6% in last fiscal (2017-18) as it battled lingering effects of demonetisation in 2016, businesses adjusting GST in 2017 and subdued agriculture.

Growth Projections in South Asia: It will remain among world’s fastest, driven by recovery in India, region’s largest economy. Asian consumers and commodity price rises will fuel higher inflation in the region.

China’s growth projection: It will slow down to 6.6% and 6.4% in 2018 and 2019 respectively as its domestic economic policy leans further toward financial stability and more sustainable growth trajectory.

Regional Inflation Projections: It is projected to average 4.6% in FY 2018 (2018-19), rising to 5% in FY 2019 with further firming of global commodity prices and strengthening of domestic demand. Regional consumer price inflation (CPI) is projected to accelerate to 2.9% in 2018 and 2019, from 2.3% registered in 2017. Inflation projections for next two years, however, are well below 10-year regional average of 3.7%.

Prospects for Policy stimulus: It remains limited and there is risk of tight interest rate regime. The deferment of fiscal consolidation, upside risks of inflation and expected hikes in US interest rates in 2018 will squeeze maneuvering room for policy rate cuts to stimulate growth.

Asian Development Bank (ADB)

ADB is a regional development bank which aims to promote social and economic development in Asia. It was established in December 1966. It is headquartered in Manila, Philippines. Now it has 67 members, of which 48 are from within Asia and the Pacific and 19 outside.

The ADB has been modelled closely on the World Bank. It has similar weighted voting system where votes are distributed in proportion with members’ capital subscriptions. As of 2014, Japan was largest shareholder (capital subscription) of ADB having 15.7% shares followed by US (15.6%), China (6.5%), India (6.4%), and Australia (5.8%).