Indian economy to continue to lead global growth: IMF

The multilateral organisation said that as one of the world’s fastest-growing economies—accounting for about 15 per cent of global growth—India’s economy has helped to lift millions out of poverty

August 7, 2018

The IMF said that reform measures such as the inflation-targeting monetary policy framework, the introduction of Goods and Services Tax (GST), the Insolvency and Bankruptcy Code (IBC) and liberalisation of foreign investment inflow have augmented the economy

The Washington DC-based multilateral organisation expects economic growth to pick up to about 7.3 per cent during the current financial year 2018-19, from 6.7 per cent in the year prior. This will further strengthen to 7.5 per cent in 2019-20, according to IMF

Government of India expects that the economic recovery would continue to strengthen and be broad-based, as agricultural output improves, industrial output expands in line with growing demand, credit from banks picks up, and the services sector continues to grow

The IMF forecasted that India’s merchandise export will increase by 13.2 per cent in 2018-19 as compared with 10.3 per cent in 2017-18, while import will increase by 16.5 per cent, as compared with 19.5 per cent in 2017-18; FDI is also touted to strengthen

The International Monetary Fund (IMF), in a report published on August 7, said that the Indian economy will continue to lead global economic growth. The multilateral organisation said that as one of the world’s fastest-growing major economies—accounting for about 15 per cent of global growth—India has lifted millions out of poverty. The IMF said that reform measures such as the inflation-targeting monetary policy framework, the introduction of Goods and Services Tax (GST), the Insolvency and Bankruptcy Code (IBC) and liberalisation of foreign investment inflow have augmented the economy. The reforms have helped in opening up the economy to foreign investors. The organisation expects economic growth to pick up to about 7.3 per cent during the current financial year 2018-19, from 6.7 per cent in the year prior. This will further strengthen to 7.5 per cent in 2019-20, according to IMF.

The agency added that India will need to build on the reform measures to boost per capita income, which continues to be below other large emerging economies. To this effect, Indian authorities have initiated important structural reforms to spur the nation’s catch up with more advanced economies and to improve living standards for all. The measures also aim to considerably increase investment and formal job creation. In the current financial year, IMF said that India’s economic growth will be driven by strengthening investment and robust private consumption. Government of India expects that the economic recovery would continue to strengthen and be broad-based, as agricultural output improves on the back of a predicted normal monsoon, industrial output expands in line with growing domestic and external demand, credit from banks picks up, and the services sector continues robust growth.

With improving capacity utilization and credit uptake, investment activity is expected to remain robust. The report also highlighted a significant rise in infrastructure investment, particularly in road construction, with the Government’s focus on demand and job creation through spending on rural and labor-intensive infrastructure likely to support rural demand. The IMF also forecasted that India’s merchandise export will increase by 13.2 per cent in 2018-19, as compared with 10.3 per cent in 2017-18. Meanwhile, import will increase by 16.5 per cent, as compared with 19.5 per cent in 2017-18. India’s US$2.5 billion economy has seen rising interest from foreign investors given the improving investment metrics. Beyond catering to the vast and growing local market, investors are setting up operations in India to export on the back of the local high-margin resources and capabilities.