India’s gross domestic product is projected to grow at 7.6 per cent this year, up from last projection
The International Monetary Fund (IMF) has predicted that Indian economy will grow at a faster rate than projected earlier. The IMF's World Economic Outlook (WEO) October 2016 said India's gross domestic product (GDP) was set to achieve a growth of 7.6 per cent for the current and next year. The previous report in July had forecast a growth rate of 7.4 per cent for both years.
The WEO said the Indian economy was on the path of strong recovery, “benefiting from a large improvement in the terms of trade, effective policy actions, and stronger external buffers, which have helped boost sentiment.”
China slipped behind India in growth predictions—its projections remain unchanged at 6.6 per cent for 2016 and 6.2 per cent for 2017. The global growth has been pegged at 3.1 per cent in 2016 and 3.4 per cent in 2017. However, emerging Asia, especially India, continues to be resilient. IMF projects Indian economy to touch 8.1 per cent in 2021-22. As per the IMF projections, India will be the fastest growing major economy in the world.
The WEO said India’s economy had benefited from lower commodity prices, and inflation had declined more than expected. The IMF wanted the country to continue reforming its tax system, eliminate subsidies and increase spending on infrastructure, education and health care.
The WEO warned against inflation buildup due to constraints in food storage and distribution problems. It urged for more structural reforms to contain consumer price inflation within the target.
It lauded the efforts taken by the Reserve Bank of India to strengthen bank balance sheets. Implementation of the goods and services tax and labour market reforms were needed to create better investment climate in India, rated as the third largest Asian economy. “Additional labour market reforms to reduce rigidities are essential for maximising the employment potential,” it said.
The report appreciated the many positive measures undertaken by the Modi government over the past two years. However, additional measures to enhance efficiency in the mining sector and to increase electricity generation were required to bolster up productivity.
Global trade growth has taken a downturn in recent years. Global economy will continue to be dull following the slowdown in the US and Britain's decision to exit from the European Union. “The recent upticks in protectionism are holding back trade growth,” the WEO said.
The report recommends that countries need to rely on all policy levers—monetary, fiscal and structural—to lift growth prospects.