IMF Forecasts 7.4% Growth for India in FY19

The International Monetary Fund has said India’s growth will pick up in FY19. That will see the country regain the tag of fastest-growing major economy, backing the government’s revival theme. The IMF also said 2017 saw the best global growth in seven years.

India is forecast to grow 7.4% in FY19 against 6.7% this year, gaining pace to 7.8% in FY20, the IMF said in its January update of the World Economic Outlook: Brighter Prospects, Optimistic Markets, Challenges Ahead that was released simultaneously in Davos and Washington.

The global economy is expected to grow at 3.9% this year, faster than 3.7% forecast in October. India’s growth remains unchanged from the October forecast.

In the current year, China will grow 6.8%, just ahead of India but will slip to 6.6% next year. The US is forecast to grow 2.7% and 2.5% in 2018 and 2019, respectively, higher by 0.4 and 0.6 percentage point than earlier estimates. According to India’s official estimates, the economy will grow 6.5% in the current fiscal with the second half clocking 7% growth.

Early corporate results for the October-December quarter have shown a pickup in earnings, providing more evidence of a recovery. India has slipped behind China this year owing to the disruption caused by demonestisation and the imposition of GST.

Industrial production growth touched a 25-month high of 8.4% in November. Consumer goods leader Hindustan Unilever reported 11% volume growth in the December quarter, indicating a revival in the rural economy. Exports have grown at a fast clip in the last two months amid the global resurgence while automobile sales have been robust.

In December, passenger vehicles sales rose 5.2% from a year earlier to 239,712 units. Sales of commercial vehicles surged 52.6% to 82,362 units, while those of two-wheelers rose 41.5% to 1.29 million units. Meanwhile, stock markets have been surging, hitting successive records over the past few weeks, buoyed by revival prospects and earnings optimism, apart from other factors.

The government has also announced a reduction in extra borrowings it had planned in the January-March quarter following better-than-expected tax collections.

The IMF said rich asset valuations and faster-than-expected increases in advanced economy core inflation and interest rates, inward-looking policies, geopolitical tensions, and political uncertainty in some countries are key risks to global growth.

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