IMF cuts India's growth projection, but still retains first place in the world

NEW DELHI: The International Monetary Fund (IMF) has reduced India's growth forecast by 10 basis points to 7.3% for the current year and 30 basis points to 7.5% in 2019, citing monetary tightening faster than expected crude prices.

The international body had forecast growth of 7.4% and 7.8% for 2018 and 2019, respectively, in its April forecast. India is still the fastest growing economy, far ahead of 6.6% and 6.4% growth for China. A base point is one hundredth of one percent.

Among emerging and developing economies, growth prospects are also becoming more unequal, with rising oil prices, rising yields in the United States, escalating trade tensions and trade-offs. currency pressures in some economies with lower fundamentals. update of the World Economic Outlook (WEO).

Global growth forecasts remain unchanged at 3.9%, with oil producers winning at the expense of consumers.

"The projection is respectively 0.1 and 0.3 percentage point lower for 2018 and 2019 at the April WEOs, reflecting the negative effects of higher oil prices on domestic demand and tightening. monetary policy faster than expected, "notes the update.

Anticipating inflationary risks, the Reserve Bank of India, at its June meeting on monetary policy, raised the repo rate by 25 basis points to 6.25% for the first time in four and a half years.

India's wholesale inflation peaked at five and a half years of 5.77% in June. India's crude imports averaged $ 73.85 a barrel in June this year compared with $ 46.56 in June last year.

"The central banks of the major emerging market economies – notably Argentina, India, Indonesia, Mexico and Turkey – have raised their key rates, reacting to the crisis. inflation and exchange rate pressures ".

However, he said that India's growth rate is expected to grow 6.7% in 2017 as a result of the exchange rate initiative and the introduction of the tax on goods and services. During the quarter ended March 2018, India's economy grew by 7.7%, a seven-quarter high, thanks to higher government spending and investments.

Last week, the World Bank declared that India had emerged as the sixth largest economy in the world in 2017 with a GDP of $ 2.59 billion, surpbading France and probably exceeding the United Kingdom. Uni, which occupies the fifth position.

While the IMF reduced GDP growth forecasts for India and Brazil, it retained for the United States, Russia and China, the outlook for some exporters of oil have strengthened.