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IMF forecasts India's GDP to grow at 7.5 per cent in 2019/20 fiscal year

Press Trust of India  |  New York 

India's GDP is poised to grow by 7.3 per cent in the 2018-19 fiscal and 7.5 per cent in 2019-2020 on strengthening of investment and robust private consumption, the IMF said in its latest projection.

The (IMF), in the report published on Tuesday, said the near-term macroeconomic outlook for is "broadly favourable."

Growth is forecast to rise to 7.3 per cent in fiscal year 2018/19 and 7.5 per cent in 2019/20 on strengthening investment and robust private consumption, the report said.

Headline inflation is projected to rise to 5.2 per cent in fiscal year 2018/19, as demand conditions tighten, along with the recent depreciation of the rupee and higher oil prices, housing rent allowances and agricultural minimum support prices, it said.

The current account deficit is projected to widen further to 2.6 per cent of the GDP on rising and strong demand for imports, offset by a slight increase in remittances, the report said.

It said that financial sector reforms have been undertaken to address the twin balance sheet problems, as well as to revive credit and enhance the efficiency of credit provision by accelerating the cleanup of and corporate balance sheets.

"Stability-oriented macro-economic policies and progress on structural reforms continue to bear fruit" in the country, the report said.

It said following disruptions related to the November 2016 currency exchange initiative and the July 2017 Goods and Services Tax (GST) rollout, growth slowed to 6.7 per cent in fiscal year 2017/18, but a recovery is underway led by an investment pickup.

Headline inflation averaged 3.6 per cent in fiscal year 2017/18, a 17-year low, reflecting on a return to normal monsoon rainfall, agriculture sector reforms, subdued domestic demand and currency appreciation.

The report recommended that continued fiscal consolidation is needed to lower elevated public debt levels, supported by simplifying and streamlining the GST

Further, while important steps have been taken to improve the recognition of Non-Performing Assets (NPAs) and recapitalise Public Sector Banks (PSBs), more needs to be done.

"A recent large fraud at a PSB highlights financial sector weaknesses and underscores the need for the government to take further steps to improve the PSBs' governance and operations, including by considering more aggressive disinvestment," it said.

With demand recovering and rising oil prices, medium-term headline inflation has risen to 4.9 per cent in May 2018, above the mid-point of the of (RBI)'s headline inflation target band of about four per cent.

However persistently-high household inflation expectations and large general government fiscal deficits and debt remain key macroeconomic challenges.

"Systemic macro-financial risks persist, as the weak credit cycle could impair growth and the has created vulnerabilities," the report said.

Economic risks are tilted to the downside, the report said, adding that on the external side, risks include a further increase in international oil prices, tighter global financial conditions, a retreat from cross-border integration including spillover risks from a global trade conflict, and rising regional geopolitical tensions.

"Domestic risks pertain to tax revenue shortfalls related to continued GST implementation issues and delays in addressing the twin balance sheet problems and other structural reforms," it said.

IMF Board Directors welcomed the strong economic growth and commended the Indian authorities for the important and wide-ranging reforms.

While noting the broadly positive outlook, the directors observed that risks are tilted to the downside from external factors, such as and tighter global financial conditions, as well as domestic financial vulnerabilities.

Against this background, they underscored the need for continued prudent macroeconomic policies and renewed emphasis on macro-financial and structural reforms.

IMF's for told that India is a source of growth for the global for the next few decades and it could be what was for the world

"India now contributes, in purchasing power parity measures, 15 per cent of the growth in the global economy, which is substantial," Salgado said.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, August 09 2018. 12:45 IST