• HDFC
• 21 Aug 2018
• Knowledge Centre

HDFC, Tester

In its Asia Pacific Regional Economic Outlook, the International Monetary Fund (IMF) reinforced its faith in the India growth story. India is pegged as one of the world’s fastest-growing economies, accounting for about 15% of global growth, and future prospects look bright.

 

Recent policy decisions - like that of the implementation of the Goods and Services Tax (GST) - support the view that the country’s economy is on the path of growth.

 

Key Parameter

 

The report reflected the belief that “Asia continues to be both the fastest-growing region in the world and the main engine of the world’s economy, contributing more than 60% to global growth (three-quarters of which comes from China and India).”

 

However, to sustain speedy growth and raise the per capita income for the country’s 130 crore populace, the report highlighted the fact that India will need to build on the success of its reforms.

 

A World Bank report released earlier this year supports IMF’s vision for the Indian economy. It highlighted the fact that despite fluctuations in GDP growth, India’s long-term trend is stable and resilient. The country will witness economic growth owing to the effect of reforms made in the 1990s and early 2000s.
According to the World Bank, India’s per capita income could touch Rs 86,689, or US$3.7 a day in the current fiscal. The report also reflects the World Bank’s faith in the future of the country’s economy, and that it plans to lend US$20 bn to US$25 billion in the next five years for investment in infrastructure, human resources, and natural resources management.

 

Second Opinion

 

IMF Country Focus carried an interview with Mr. Ranil Salgado, Head of the IMF team in India. He asserted his belief in the economic growth of the country.
“India’s economy is gaining momentum, thanks to the implementation of several recent noteworthy policies such as the enactment of the long-awaited Goods and Services Tax, and the country opening up more to foreign investors. Therefore, we expect economic growth to rise to ~ 7.3% for FY19 meaning the year that runs from April 2018 through March 2019 from 6.7 % in the previous year. Meanwhile, inflation has edged higher, in part due to a reduction of economic slack,” he said.

 

He also highlighted the fact that going ahead, sustenance will be key to the country’s growth. “To sustain and build on these policies, and to harness the demographic dividend associated with a growing working-age population (which constitutes about two-thirds of the total population), India needs to reinvigorate reform efforts to keep the growth and jobs engine running,” he added.

 

The upbeat economic forecast is supported by overseas investors’ interest in India’s equity market. On 9th August 2018, the Sensex hits an all-time high of 37,931on account of increased FII inflows. While the upcoming elections and weak macros may raise questions regarding the state of the country’s economy, it can be safely said that growth will continue in the long term.