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IMF says India to grow at 7.4%, cites recovery from demonitisation, GST

With growth picking up after falling sharply in the second quarter of 2017 due to “one-off factors”, India in 2018 and 2019 would re-emerge as one of the fastest growing major economies, IMF said.

business Updated: Apr 20, 2018 18:01 IST
Yashwant Raj
Yashwant Raj
Hindustan Times, Washington
India GDP growth,India GDP,IMF
India’s high public debt and recent failure to achieve the budget’s deficit target call for continued fiscal consolidation into the medium term to further strengthen fiscal policy credibility, the IMF World Economic Outlook report said.(AFP Photo)

The International Monetary Fund (IMF) on Tuesday joined World Bank to declare India had truly and finally recovered from the after-effects of demonetisation and introduction of goods and services tax (GST) over which it had scaled down its growth projections for the country last year.

“India’s economy is projected to grow at 7.4% in 2018 and 7.8% in 2019, up from 6.7% in 2017,” the fund’s World Economic Outlook (WEO) report for the quarter ending April said.

The forecast is unchanged from the October WEO, it said, “with the short-term firming of growth driven by a recovery from the transitory effects of the currency exchange initiative and implementation of the national goods and services tax, and supported by strong private consumption growth.”

An IMF economist said on background that impact of demonetisation “waned some time ago and the second hiccup, implementing the GST, which, as economists we are very supportive of, but clearly these hiccups...and glitches have been resolved and we do see growth returning, firms doing better.”

The IMF report came just days after its sister organisation, the World Bank, set the ball rolling with a clear message that India had turned the corner on demonitisation and GST.

“India’s economy has recovered from the withdrawal of large denomination bank notes and the Goods and Services tax,” it had said in a report.

The Bank expected India’s growth to accelerate from 6.7% in 2017 to 7.3% in 2018 and to stabilise at 7.5% in 2019 and 2020, supported by a sustained recovery in private investment and private consumption.

India’s recovery, it said, would propel South Asia back to the top as the world’s fastest growing region, and even help it widen the gap over East Asia and the Pacific. “Much of progress, however, is driven by India’s growth rebound and is not consistent across countries.”

| Read: IMF forecasts global growth at 3.9%, says will soften in the next couple of years

The IMF had cut India’s growth prospects in its October, 2017 update of the WEO to 6.7% for 2017 from earlier projection of 7.2%, and to 7.4% from 7.7%. It had cited “the lingering impact of the authorities’ currency exchange initiative as well as uncertainty related to the mid-year introduction of the countrywide Goods and Services Tax”.

The April outlook is released annually during the spring meetings of the IMF-World Bank group in Washington DC, attended by member countries.

The Indian delegation is being led this time by economic affairs secretary Subhash Garg, as finance minister Arun Jaitley, the traditional head by way of his position, is ailing.

The WEO’s April update said the global economy grew by 3.8% in 2017 and projected it to “tick up” to 3.9% this year and next. Growth in emerging markets and developing economies will increase from 4.8% in 2017 to 4.9% in 2018 and 5.1% in 2019 (which is 0.1 percentage point higher for 2019 than in the October projections).

Though growth in China is expected to “moderate” from 6.9% in 2017 to 6.6% in 2018 and 6.4% in 2019, the report said the forecast is higher (by 0.1 percentage point in both 2018 and 2019) over October numbers, “reflecting an improved external demand outlook”.

First Published: Apr 17, 2018 18:48 IST