The Indian economy is expected to grow at 7.4 per cent in the current fiscal, and accelerate further to 7.8 per cent as it recovers from the impact of demonetisation and Goods and Services Tax (GST) rollout, International Monetary Fund (IMF) said. Its Regional Economic Outlook: Asia and Pacific (REO) stated that Asia continues to be the main engine of the world's economy, accounting for more than 60 per cent of global growth, three quarters of which comes from China and India alone. It said, “But there are risks and challenges ahead, including from a tightening of global financial conditions, a shift toward inward-looking policies and over the longer run, population ageing, slowing productivity growth, and the rise of the digital economy.”
The report said that Asia is expected to grow at 5.6 per cent this year and next, adding that the outlook was supported by strong global demand, as well as still accommodative policies and financial conditions. “In India, growth is forecast to rebound to 7.4 per cent in FY 2018/19 as the economy recovers from disruptions related to the currency exchange initiative and the roll out of the new Goods and Services Tax.” It said China was projected to grow at 6.6 per cent in the current year that will moderate to 6.4 per cent next year.
The report said it had 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 per cent lower than target in Asian advanced economies, and 0.8 per cent under target in Asian emerging market economies.” It further said inflation has become more backward-looking, meaning that past inflation drives current inflation more than future expectations. It means that if inflation rises, it may persist. “Further, there is some evidence that the sensitivity of inflation to economic slack has decreased, suggesting that if inflation rises, there may be a large hit to output when reducing it.”