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10-Apr2019

IMF projects India's growth rate at 7.3% for 2019

The International Monetary Fund (IMF) in its latest World Economic Outlook (WEO) has projected India's growth rate at 7.3% in 2019 and 7.5% 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, thus remaining the fastest growing major economy of the world. Though, 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, amid the recent revision to the national account statistics that indicated somewhat softer underlying momentum.

The report stated that growth in India is expected to stabilise at just under 7% over the medium term, based on continued implementation of structural reforms and easing of infrastructure bottlenecks. It believes that in India, continued implementation of structural and financial sector reforms with efforts to reduce public debt remain essential to secure the economy's growth prospects. 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.

IMF noted that important steps have been taken to strengthen financial sector balance sheets, including through accelerated resolution of non-performing assets under 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. Besides, in 2018, the country's growth rate was 7.1%, as against China's 6.6%. In 2019, it has projected a growth rate of 6.3% for China and 6.1% in 2020.


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