Daily Management Review

India To Remain Fastest Growing Major Economy In 2019 And 2020: IMF


The International Monetary Fund (IMF) has predicted that the Indian economy would remain the fastest growing major economy of the world for 2019 and 2020 with projected growth rate of 7.3 percent for 2019 and 7.5 percent for 2020. This growth would be driven by continued recovery of investment and increased domestic consumption.
Compared to China’s growth rate of 6.6 per cent, the Indian economy grew at 7.1 per cent in 2018. According to the latest World Economic Outlook projections of the IMF released on the occasion of its annual spring meetings of the International MF and the World Bank, China is expected to grow at 6.3 per cent in 2019 and at 6.6 per cent in 2020.
"In India, growth is projected to pick up to 7.3 percent in 2019 and 7.5 percent in 2020, supported by the continued recovery of investment and robust consumption amid a more expansionary stance of monetary policy and some expected impetus from fiscal policy,” the report said.
"Nevertheless, reflecting the recent revision to the national account statistics that indicated somewhat softer underlying momentum, growth forecast have been revised downward compared with the October 2018 WEO by 0.1 percentage point for 2019 and 0.2 percentage point for 2020, respectively," it further read.
The IMF noted that over the medium term, the Indian economic growth would stabilise at just under 7¾ per cent because of the continued implementation of structural reforms and loosening of bottlenecks in infrastructure projects.
India has to continue with its structural and financial sector reforms and focus constantly at reduction of public debt in order to ensure its continued growth, noted the World Economic Outlook.
"In the near term, continued fiscal consolidation is needed to bring down India's elevated public debt. This should be supported by strengthening goods and services tax compliance and further reducing subsidies,” it said.
The report also however noted that strengthening of the financial sector balance sheets have been undertaken in India, through measures such as increased speed of resolution of non-performing assets helped by a simplified bankruptcy framework.
"These efforts should be reinforced by enhancing governance of public sector banks. Reforms to hiring and dismissal regulations would help incentivise job creation and absorb the country's large demographic dividend; efforts should also be enhanced on land reform to facilitate and expedite infrastructure development,” the report said.
In comparison, the report also noted that the Chinese economy would slow down on an annualised basis 2019 and 2020, despite the implementation of fiscal stimulus and assuming that there would be no fresh tariffs imposed on Chinese products by the United States after what has already been included in the tariff regime till September of 2018.
The IMF said that this reflected the weaker underlying growth in China in 2018, especially in the second half, and the ongoing impact of the trade war between China and the US.