World Economic Outlook 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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IMF lowers India’s growth forecast to 6.7 %

The International Monetary Fund (IMF) in its October World Economic Outlook (WEO) has lowered India’s economic growth forecast at 6.7% in 2017 and 7.4% in 2018.

It is slower than 0.5 and 0.3 percentage points projected earlier by IMF. In April 2017 forecast, IMF had revised upwards India’s growth performance for 2016 to 7.1% as opposed to 6.8%

Key facts

The report has cited impact of demonetisation and implementation of Goods and Services Tax (GST) for expected slowdown during the current and the next year. It also held that India’s slowdown is happening even as the world economy is picking up steam. But it expects revival of growth in future due to structural reform.

India will regain fastest growing major economy tag next year when it is forecast to grow 7.4%, slower than earlier estimate of 7.7% but higher than China’s 6.5%. It also expects that the Indian economy to grow 8% in the medium term on the back of reforms undertaken so far.

Comment

IMF forecast is latest in series of downgrades in India’s growth prospects unveiled by other multilateral agencies such as World Bank, Asian Development Bank (ADB) and OECD.  Earlier, RBI had lowered its growth forecast for 2017-18 to 6.7% from 7.3%.

World Economic Outlook (WEO)

The 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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