India will be fastest growing economy in 2018 according to IMF

The International Monetary Fund (IMF) reaffirmed on Wednesday that India will be the fastest growing major economy in 2018, with a growth rate of 7.4 per cent that rises to 7.8 per cent in 2019 with medium-term prospects remaining positive.

The IMF`s Asia and Pacific Regional Economic Outlook report said that India was recovering from the effects of demonetisation and the introduction of the Goods and Services Tax and “the recovery is expected to be underpinned by a rebound from transitory shocks as well as robust private consumption.”

Medium-term consumer price index inflation “is forecast to remain within but closer to the upper bound of the Reserve Bank of India`s inflation-targeting banda of four per cent with a plus or minus two per cent change, the report said.

However, it added a note of caution: “In India, given increased inflation pressure, monetary policy should maintain a tightening bias.” It said the consumer price increase in 2017 was 3.6 per cent and projected it to be five per cent in 2018 and 2019.

“The current account deficit in fiscal year 2017-18 is expected to widen somewhat but should remain modest, financed by robust foreign direct investment inflows,” the report said.