World Economic Outlook Current Affairs
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.
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.
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).
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.