India will reclaim its tag the fastest growing economy tag among developing countries in 2018 following last year’s slowdown due to demonetisation and GST rollout

IMF has projected India’s GDP growth rate at 7.4% in 2018 and 7.8% in 2019, making it the fastest growing economy in the world.

Washington/Davos: India is projected to grow at 7.4% of its gross domestic product (GDP) in 2018 as against China’s 6.8%, the International Monetary Fund (IMF) said Monday, making it the fastest growing economy among emerging economies following last year’s slowdown due to demonetisation and the implementation of goods and services tax (GST).

In its latest World Economic Outlook update released on Monday ahead of the World Economic Forum in Davos, the IMF projected India’s GDP growth rate at 7.4% in 2018 and 7.8% in 2019.

China, during the same period, is expected to grow at 6.8% and 6.4% respectively, the IMF said.

The aggregate growth forecast for emerging markets and developing economies for 2018 and 2019 remain unchanged, with marked differences in the outlook across regions.

“Emerging and developing Asia will grow at around 6.5% over 2018-19, broadly the same pace as in 2017,” IMF said, adding that the region continues to account for over half of world growth.

“Growth is expected to moderate gradually in China (though with a slight upward revision to the forecast for 2018 and 2019 relative to the fall forecasts, reflecting stronger external demand), pick up in India, and remain broadly stable in the ASEAN-5 region,” IMF added.

In 2017, China’s GDP growth rate of 6.8% was ahead of India’s at 6.7%, giving the former the tag of being the fastest growing emerging economy. The Indian economy, which grew at 7.1% in 2016, slowed in 2017 due to demonetisation in November 2016 and GST rollout on 1 July 2017.

According to Maurice Obstfeld, IMF’s economic counsellor and director of research, India and Chin are predictably headed for slower growth. China will both cut back the fiscal stimulus of the last couple of years and, in line with the stated intentions of its authorities, rein in credit growth to strengthen its overextended financial system. Consistent with these plans, the country’s ongoing and necessary rebalancing process implies lower future growth, Obstfeld said at a news conference in Davos.

 

“As for the US, whatever output impact its tax cut will have on an economy so close to full employment will be paid back partially later in the form of lower growth, as temporary spending incentives (notably for investment) expire and as increasing federal debt takes a toll over time,” he added.

Earlier in January, a top IMF official said that India is reclaiming its place as global growth leader. “China alone is providing one-third of global growth. Japan has been growing above potential for several quarters,” IMF’s first deputy managing director David Lipton had said at the Asian Financial Forum in Hong Kong on 15 January.

“India is reclaiming its place as a growth leader after a short slowdown. And the ASEAN-5 have gained momentum in response to higher investment and increased exports,” Lipton had said. PTI

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