The IMF, (International Monetary Fund) has said that India’s growth will remain robust in the future.
Although, the IMF has downgraded the country’s growth projections for 2018-19, due to high oil prices and a tight monetary policy regime.
This definitely helps in building trust among foreign investors and thus, helps in making Indian economy far more attractive to investors globally.
What Do the Numbers Say?
The IMF forecasted a growth rate of 7.3% in 2018 and 7.5% in 2019 for India.
As of now, It is down by 0.1% (10 basis points) and 0.3% (30 basis points), from its April projections.
The major reasons cited by IMF was faster-than-anticipated monetary tightening and higher crude prices.
India is still the fastest growing economy globally. Much faster than China which has been projected to grow at 6.4% in 2018, which is much below India.
Emerging Markets and Developing Economies
Among emerging markets and developing economies, growth prospects are also becoming more uneven.
Amidst rising oil prices, higher yields in USA, an escalating trade war and market pressure on some economies with weaker fundamentals, the growth prospect looks shaky.
Forecast of global growth remains unchanged at 3.9% with oil producers gaining money at the expense of consumers.
Anticipating risks due to inflation, the Reserve Bank of India (RBI), in the June Monetary Policy Meeting, hiked the repo rate by 25 basis points to 6.25% for the first time in four-and-a-half years.
According to many experts, given the inflationary risks building up due to higher oil prices and the weakening Rupee, RBI may go for a 50 basis points (0.5%) hike by year-end.
Warning by IMF
The IMF warned countries about the looming trade war, saying that it is threatening to derail the economic recovery.
Also, IMF has decided to reduce the economic growth of Brazil by 50 basis points to 1.8% this year. While it has reduced the growth forecast for India, Brazil and Argentina, it has retained it for USA, China and Russia.
Ray of Hope for India
After slowing down in FY 2017-18 on the back of two structural changes- demonetization and GST, the Indian economy is expected to make a 7% plus growth rate.
This will mean more inflow of Foreign Institutional Investors (FII) in India and hopefully, it will result in a growing economy and booming market.