NEW YORK, NY – Citing India’s “reform momentum” as a key factor, the International Monetary Fund on July 29 raised India’s growth projections for this and next fiscal years to 6.4 per cent, affirming its position as the world’s fastest-growing major economy.
Deniz Igan, a division chief in the Research Department, highlighted the “reform momentum supporting robust consumption growth and a push for public investment” as a driver of India’s growth. The World Economic Outlook (WEO) Update increased projections for India for the current fiscal year by 0.2 per cent from April’s figures and by 0.1 per cent for the next fiscal year, attributing this to a “more benign external environment than assumed in April”.
The WEO noted in a footnote that if projections were made on a calendar year basis, India’s growth would be 6.7 per cent this year and 6.4 per cent for the next. India’s fiscal year, which forms the basis for the main projections in the report, begins in April, while the IMF typically follows the calendar year for most other countries.
Igan, speaking at a news conference in Washington during the WEO’s release, also cited the suspension of higher tariff rates threatened by the US and downward revisions of inflation to 3.7 per cent this year and 4 per cent next year, driven by lower food prices, as reasons for the upward revision of India’s growth prospects.
Despite the global turmoil stemming from tariff disputes, the WEO raised the global growth outlook for the current calendar year by 0.3 per cent from April’s numbers to 3.2 per cent, and by 0.1 per cent for next year to 3.2 per cent. The report attributed these increases to “stronger-than-expected front-loading [or stockpiling of imports in the US] in anticipation of higher tariffs; lower average effective US tariff rates than announced in April; an improvement in financial conditions, including due to a weaker US dollar, and fiscal expansion in some major jurisdictions”.
For China, the second fastest-growing major economy, the WEO increased its growth projection for the current calendar year by 0.8 per cent to 4.8 per cent. It is projected to decline to 4.2 per cent next year, despite a 0.2 per cent increase in projections for that year. The US growth prospects for this year rose by 0.1 per cent to 1.9 per cent and by 0.3 per cent to 2 per cent next year. Overall, for advanced countries, the WEO raised the outlook by 0.1 per cent to 1.5 per cent this year and 1.6 per cent next year.
The report cautioned that a “rebound in effective tariff rates could lead to weaker growth” globally. It added, “Elevated uncertainty could start weighing more heavily on activity, also as deadlines for additional tariffs expire without progress on substantial, permanent agreements.”
Igan stated that for India to sustain its growth trajectory, “priorities would include fostering job creation and absorbing excess labour from the agricultural sectors, by reskilling labour, by allowing more labour market flexibility”. She further recommended that India continue to invest in infrastructure and “remove trade restrictions”. “In the medium term”, she added, “India needs to continue to invest in education, take a stab at land reform, extend the social safety net, and reduce red tape to allow businesses to perform better”. (IANS)