IMF sees India reemerging as world’s fastest-growing economy

The implementation of the national Goods and Services Tax (GST), rising private consumption with the fading transitory effects of demonetisation and the government’s move to clean up the banking system would augur well for the Indian economy to climb back to the high growth path, according to the International Monetary Fund.

The IMF expects India to re-emerge as one of the fastest growing major economies in the 2018-2019 period. It has projected the country's growth rate at 7.4 per cent in 2018 and 7.8 per cent in 2019.

The IMF noted a strong pick-up in the Indian economy, after falling sharply in the second quarter of 2017. This, it said, is mainly due to the strong private consumption, as well as fading transitory effects of demonetisation and implementation of the national Goods and Services Tax (GST).

The recent steps taken to deal with the accumulated problems in banks are important ones, PTI quoted the International Monetary Fund’s (IMF) first deputy managing director David Lipton as saying.

Lipton identified digital ID technology and other structural reforms as important moves towards inclusive growth and making India an economic powerhouse.

The revival in India’s economic growth will compensate for a fall in China’s gradual growth, according to IMF.

The multilateral agency expects China to grow at 6.6 per cent in 2018 and 6.4 per cent in 2019.

The World Bank on 17 April, had noted a recovery of the Indian economy from the effects of demonetisation and the GST and predicted a growth rate of 7.3 per cent in 2018.

However, the IMF has cautioned that it should strive to accelerate investments and exports to take advantage of the recovery in global growth.

He said India’s goal of sustained growth that boosts the living standards of across the population adds up to an awful lot of economic activity and should lead to a very healthy acceleration for a country that is huge.

A country of India’s size has to be very careful to keep public finances under control because any interruption of economic activity that comes from fiscal difficulties would be a setback, he said. Lipton also said the eco-system being built around digital ID technology offers a big help in achieving inclusive growth.

The Indian government is effectively looking at how technologies can lead to better efficiency and less waste and corruption in government interactions with the people, whether it’s in spending and benefits or the collection of taxes, the senior IMF official said.

On the Aadhaar Card technology, Lipton said it is relatively new and seems to have many advantages. “It surely has huge promises and could help overcome remoteness and promote inclusion,” he said, adding that there certainly are possible drawbacks.

On the banking system’s NPA legacy, he said, the important job is not just to recapitalise, but to change the governance and change the competitiveness so that banks serve as a positive force, allocating credit well and being a driving force in the economy.