India underlines fastest growing economy status but market rout clouds outlook

India regained its status as the world’s fastest growing major economy in the October-December quarter, surpassing China for the first time in a year as government spending, manufacturing and services all picked up.

India’s growth recovery strengthened last quarter but doubts remain over whether it can sustain that pace amid surging oil prices and a rout in emerging markets.

India is expected to grow at 7.4 per cent in 2018 and 7.8 per cent in 2019, leaving its nearest rival China behind respectively at 6.6 and 6.4 per cent in the two years, the IMF said on Tuesday. 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, it said.

China with 6.9 per cent growth jumped marginally ahead of India in 2017. India’s projected growth provides some offset to China’s gradual slowdown, the IMF said. The latest forecast is unchanged, “with the short-term firming of growth driven by a recovery from the transitory effects of the currency exchange initiative and implementation of the Goods and Services Tax, and supported by strong private consumption growth,” the WEO said.

The International Monetary Fund (IMF) in the latest World Economic Outlook (WEO) has projected India to grow at 7.4 per cent in 2018 and 7.8 per cent in 2019.

China is expected to grow respectively at 6.6 and 6.4 per cent in the two years. However, the latest IMF growth rate projection remains unchanged since the last one in October.

India’s growth rate in 2016 was 7.1 per cent as against China’s 6.7 per cent. Two major economic reforms demonetisation and goods and services tax (GST) resulted in a slight lower growth rate of 6.7 per cent in 2017.

“Even under this forecast, India would remain the fastest growing major economy in the world,” the survey said, although the International Monetary Fund earlier this year estimated that China was growing faster than India.

In the current financial year, real GDP is projected to grow at about 7%, the survey added, significantly lower than the 7.6% growth the economy registered in 2015-2016.