India is pegged to be the fastest growing economy in the world in 2017-18 and will be a key driver for global growth, according to the International Monetary Fund (IMF).

Retaining its growth forecast of 7.2 per cent for India for the fiscal year, the IMF, in its World Economic Outlook, also estimated that India would grow at 7.7 per cent in 2018-19 and said that 8 per cent growth in the medium-term is within reach. It pegged India’s growth rate at 6.8 per cent in 2016-17.

“Medium-term growth prospects are favourable, with growth forecast to rise to about 8 per cent due to the implementation of key reforms, loosening of supply-side bottlenecks, and appropriate fiscal and monetary policies,” said the report, which was released on Tuesday.

Demonetisation impact Concerned about the impact of demonetisation on the economy, the IMF had in January trimmed India’s GDP forecast by 0.4 percentage points from its earlier forecast of 7.6 per cent growth this fiscal. Moreover, praising India’s efforts at structural reforms that would drive domestic growth, the IMF has listed it as one of the factors that could help boost the global economy.

It has pegged world output at 3.5 per cent in 2017, rising marginally to 3.6 per cent in 2018. By 2022, it estimates global growth to rise to 3.8 per cent, led by developments in the emerging market and developing economies, where growth is projected to increase to 5 per cent by the end of the forecast period.

However, the IMF has also listed further reforms that India must undertake, including replacing the demonetised currency and reducing labour and product market rigidities, expanding the manufacturing base, and gainfully employing the abundant pool of labour.

Further, it said steps should also be taken to address NPAs and recapitalise public sector banks, reduce subsidies and for timely implementation of GST.

Related Topics