IMF Current Affairs

IMF cuts India growth forecast for 2018 to 7.3%

The International Monetary Fund (IMF) in its latest World Economic Outlook (WEO) update has projected growth rate of 7.3% in 2018 and 7.5% in 2019 for India as against 6.7% in 2017. This makes India, fastest growing country among major economies in 2018-19 and 2019-20.

Key Facts

India will grow by 7.3% in 2018-19 against earlier estimate of 7.4%, slightly less — 0.1 percentage point in 2018. In 2019-20, it will grow by 7.5% against earlier estimate of 7.8%. This reflects negative effects of higher oil prices on domestic demand and faster than-anticipated monetary policy tightening due to higher expected inflation.

Despite India’s slight downgrade in the projections, it continues to outperform China. Growth in China is projected to moderate from 6.9% in 2017 to 6.6% in 2018 and 6.4% in 2019. This is mainly because of regulatory tightening of financial sector takes hold and external demand softens.

The global growth is projected to reach 3.9% in 2018 and 2019, in line with forecast of April 2018 WEO. Growth prospects in emerging market and developing economies is becoming more uneven, amid rising oil prices, higher yields in United States Treasury bonds, escalating trade tensions and market pressures on currencies of some economies with weaker fundamentals.

World Economic Outlook (WEO)

WEO is survey conducted and published by IMF. It is published biannually and partly updated two times a year. It portrays the world economy in the near and medium context, with growth projections for up to four years into the future. WEO forecasts include key macroeconomic indicators, such as GDP, inflation, fiscal balance and current account of more than 180 countries around the globe. It also deals with major economic policy issues.

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India to grow 7.4% in 2018: IMF’s Asia & Pacific Regional Economic Outlook report

The International Monetary Fund (IMF) in its Asia and Pacific Regional Economic Outlook report has reaffirmed that India will be the fastest growing major economy in 2018, with growth rate of 7.4% and 7.8% in 2019.

Key Facts

India’s medium-term growth prospects remain positive. India is recovering from effects of demonetisation and introduction of Goods and Services Tax (GST). The recovery is expected to be underpinned by rebound from transitory shocks as well as robust private consumption.

Medium-term consumer price index inflation is forecasted to remain within but closer to upper bound of Reserve Bank of India’s (RBI) inflation-targeting band of 4% with a plus or minus 2% change. Given increased inflation pressure, monetary policy should maintain a tightening bias.  India’s current account deficit in fiscal year 2017-18 is expected to widen somewhat but will remain modest, financed by robust foreign direct investment inflows

South Asian Region: After India, Bangladesh is projected to be fastest-growing economy in South Asia followed by Sri Lanka and Nepal. (Pakistan, which is grouped with Middle East, was not covered in this report). Overall, South Asia continues will be both fastest-growing region in the world and main engine of world’s economy.

The region contributes more than 60% of global growth and three-quarters of this comes from India and China, which is expected to grow 6.6 % in 2018 and 6.4% in 2019. US Government’s fiscal stimulus is expected to support Asia’s exports and investment.

However, in the medium term downside risks dominate for region and these include tightening of global financial conditions, shift toward protectionist policies, and increase in geopolitical tensions. Because of these uncertainties countries in the region need to follow conservative policies aimed at building buffers and increasing resilience and push ahead with structural reforms.

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