India to grow at 7.4 percent in FY 2018/19

The International Monetary Fund (IMF) on Wednesday predicted a 7.4 per cent growth of the Indian economy in the current fiscal. The growth will accelerate further to 7.8 per cent as it recovers from the impact of demonetisation and GST roll out, said the IMF. India’s growth is expected to be more than China which is projected to grow at 6.6 per cent in the current year and will moderate to 6.4 per cent next year.

Noting that present rates of inflation in Asia are some of the lowest in decades, it said, it has seen some upward movement since September 2017 on the back of rising oil prices. “But core inflation — which excludes food and energy — remains low and below target in many economies. In 2017, headline inflation on average was 0.6 percent lower than target in Asian advanced economies, and 0.8 percent under target in Asian emerging market economies,” it said.

The latest report explores why inflation has been so low. And it finds that first that temporary global factors, including commodity prices and imported inflation, have been key drivers of low inflation. But these factors could reverse, and inflation could rise. According to the report, inflation has become more backward-looking, meaning that past inflation drives current inflation more than future expectations. This suggests that if inflation rises, it may persist.

After India, Bangladesh is projected to be the fastest-growing economy in South Asia with growth rates of seven per cent for 2018 and 2019; Sri Lanka is projected to grow at four per cent in 2018 and 4.5 in 2019, and Nepal five per cent in 2018 and four per cent in next. (Pakistan, which is grouped with the Middle East, is not covered in the Asia report.)

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