Global Growth 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.

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India will grow at 7.3% in 2018: World Bank Report

The World Bank in its twice-a-year South Asia Economic Focus report has projected growth rate of 7.3% for India in 2018 and 7.5% for 2019 and 2020. The growth is expected to accelerate from 6.7% in 2017 to 7.3% in 2018 and to subsequently stabilise supported by sustained recovery in private investment and private consumption.

Key Facts

India’s recovering growth will drive South Asia to the fastest growing region. Indian economy has recovered from effects of demonetisation and the Goods and Services Tax (GST). India should strive to accelerate investments and exports to take advantage of recovery in global growth.

Disruptions from demonetisation and events surrounding implementation of GST led to setback in economic activity and potentially larger negative effect on poor and vulnerable. Private consumption will remain primary driver of growth while services sector and increasingly, industrial sector will lead production growth.

Every month, the working age increases by 1.3 million people and India will need to create 8.1 million jobs a year to maintain its employment rate. The employment rate is declining based on employment data analyzed from 2005 to 2015, largely due to women leaving the job market.

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