In its annual assessment of the Indian economy, the International Monetary Fund said, “India’s economy is picking up and growth prospects look bright. As one of the world’s fastest-growing economies—accounting for about 15 percent of global growth—India’s economy has helped to lift millions out of poverty.
“The authorities have initiated important structural reforms to spur India’s catch up with more advanced economies and to improve living standards for all. The main reforms include the inflation-targeting monetary policy framework, the Insolvency and Bankruptcy Code, the Goods and Services Tax, and steps to liberalize FDI flows and improve the business climate.”
Key highlights of the assessment:
–>There’s no change in the forecast for India GDP growth—it remains at 7.3% for the current fiscal year and 7.5% for 2020
–>The IMF predicts that growth in merchandise exports will be 13.2% this fiscal year, the highest rate since 2012. According to the IMF’s forecasts, all three engines of economic growth—consumption, investment and exports—will start firing from the current year.
–>Economic growth will lead to a rise in money supply, which is expected to go up by 11.4% this fiscal, not seen since 20114. A revival in bank credit to the private sector is expected—it’s projected to rise by 13.6% this year, also the highest rate of growth since 2014.
–> IMF thinks that foreign direct investment will rebound this year.
Potential 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. On the domestic front, risks pertained to tax revenue shortfalls related to continued GST implementation issues, as well as its high compliance and administrative costs, and delays in addressing the twin balance sheet problems and other structural reforms.