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Big Boost to India: IMF gave thumbs-up to Indian Economy and policies of Demonetisation and GST!!!

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After Asian Development Bank (ADB) and World Bank now another arm of World Bank,International Monetary Fund (IMF) has also released its report saying that India is poised to emerge as the fastest growing major economies, even as one-off effects due to policies implemented by Narendra Modi-led government such as demonetisation and GST begin to fade away.IMF has forecasted a GDP growth of 7.4% in 2018 and 7.8 per cent in 2019, surpassing rival China at 6.6 and 6.4 per cent in the two years to emerge to reclaim the spot of fastest growing major economy in the world.

“Growth in India is projected to increase from 6.7% in 2017 to 7.4% in 2018 and 7.8% in 2019 (unchanged from the October WEO), lifted by strong private consumption as well as fading transitory effects of the currency exchange initiative and implementation of the national goods and services tax,” the IMF said in the report

Global growth is seen stable at 3.9% over the current and next calendar years, almost unchanged from 3.6% in 2018.

Earlier, last week, a report by Asian Development Bank had pegged India’s economic growth forecast at 7.3%.And the report of  World Bank has also confirmed the same growth rate.Although there are little difference in the growth rate being pegged but one thing that is confirm is that the nation is on the path of growth and will surpass all other nations.There seems to be a common observation on structural reforms of GST and demonetisation also- the one-off policy related factors which impacted growth are now behind us, and the implementation of the new indirect tax regime will lead to a slew of benefits for the economy.

Noting the policy effect of demonetisation, IMF notes that due to recovery from the currency exchange initiative, there should be firming of growth in the near-term. Further, implementation of the national goods and services tax supported by strong private consumption growth will also spur growth, the IMF said. Taking specific note of GST’s impact on growth, IMF said that implementation of the GST, will help reduce internal barriers to trade, increase efficiency, and improve tax compliance. “With growth picking up after falling sharply in the second quarter of 2017 due to “one-off factors”, India in 2018 and 2019 would re-emerge as one of the fastest growing major economies,” IMF said.

The International Monetary Fund (IMF) also praised India’s using right policies and said “India has “quite a high” debt to GDP ratio, but the government is trying to lower it using “the right policies”.India’s general government debt remained relatively high, at 70 per cent of the GDP in 2017, Abdel Senhadji, Deputy Director, IMF Fiscal Affairs Department, told reporters at a news conference in Washington.”The debt level is relatively high (in India), but the authorities are planning to bring it down over the medium term with the right policies,” Senhadji said.

On the other hand, he said that for China, overall level of debt is a major challenge and to lower it, Beijing must rethink the sources of revenues for its local bodies which is responsible for 85 per cent of government spending. “The main concern has to do with the level and pace of accumulation of overall debt, private and public. So, the control over the debt level — in particular, the rhythm of debt accumulation — is a major challenge for the Chinese economy,” he said.

The IMF said improvements to the monetary policy framework also appear to have lowered inflation expectations. It sees consumer inflation at 5% this year and the next while the current account deficit is seen at 2.3% of GDP this fiscal and 2.1% next fiscal against 2% in FY18.

 

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