What does the new IMF growth vision mean for India?



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  The headquarters of the International Monetary Fund (IMF) in Washington. The economy of India has been a major beneficiary of the drop in crude oil prices between 2013 and 2015, as low oil prices boost consumption. Photo: Bloomberg "title =" The seat of the International Monetary Fund (IMF) in Washington. The economy of India has been a major beneficiary of the drop in crude oil prices between 2013 and 2015, as low oil prices boost consumption. Photo: Bloomberg "class =" img-responsive "/> 

<p> The headquarters of the International Monetary Fund (IMF) in Washington The Indian economy has been a major beneficiary of the drop in crude oil prices between 2013 and 2015 Photo: Bloomberg </p>
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<p>  The International Monetary Fund (IMF) announced Monday that the Indian economy would grow at a slower pace than it had estimated three months ago due to rising prices of crude oil and rising interest rates.In its update of the World Economic Outlook, the IMF said the negative effects of rising oil prices on domestic demand and the faster than expected tightening of monetary policy by RBI were the main reasons for its downward revision.According to the 2017-2018 Economic Survey, every 10 barrel increase in oil price reduces economic growth from 0.2 to 0.3 percentage point, which increases wholesale inflation by about 1.7 percentage points How does the high price of oil affect consumer demand and growth? </b></p>
<p>  The economy of India has been a major beneficiary of the drop in crude oil prices between 2013 and 2015, given the weakness of oil. prices encourage consumption. In contrast, high oil prices mean you have to shell out more on your cooking gas bottle and motor fuel. This results in a loss of income that a person makes up for by cutting back on discretionary spending. Rising fuel prices also increase the cost of transportation and electricity produced by gas, further reducing disposable income. </p>
<p><b>  Is India still the fastest growing economy? </b></p>
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Although China's growth projections for 2018 and 2019 have remained unchanged, they are still below India's latest growth estimates for this period.

Will the trade war launched by the United States affect global growth? Tensions constitute a "significant downside risk" for the global economy. These could derail the recovery and depress growth prospects in the medium term, both by their direct impact on resource allocation and productivity, and by weighing on investment. However, he said that the contraction impact will be minimal on the overall economy.

What Indian Policy Makers Should Watch?

While higher oil prices will reduce fiscal space for the government due to the higher-than-expected subsidy With respect to kerosene and cooking gas, it will leave little room for Excise duties on petroleum products before an election year. The government must also monitor the depreciation of the rupee, which could fuel the rise in inflation, as well as capital outflows due to higher yields in the United States.

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