IMF Current Affairs

India is now world’s sixth largest economy: IMF

According to International Monetary Fund’s (IMF) World Economic Outlook (WEO) for April 2018, India is now the world’s sixth largest economy at $2.6 trillion (interms of GDP), displacing France. The five economies ahead are United States, China, Japan, Germany and United Kingdom.

IMF’s April 2018 WEO

India is expected to grow at 7.4% in 2018 and 7.8% in 2019, making it fastest growing economy in the world. India has made progress on structural reforms in recent past, including through implementation of Goods and Services Tax (GST), which will help reduce internal barriers to trade, increase efficiency and improve tax compliance.

The medium-term growth outlook for India is strong but important challenge is to enhance inclusiveness. Moreover, India’s high public debt and recent failure to achieve budget’s deficit target needs fiscal consolidation into e medium term to further strengthen fiscal policy credibility.

The main priorities for India are lifting constraints on job creation and ensuring that demographic dividend is not wasted. For this India needs to ease labour market rigidities, reduce infrastructure bottlenecks, and improve educational outcomes.

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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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