India to become world's fastest-growing economies this year

Wednesday 25th April 2018 06:43 EDT

A poll of economists estimate that India will claim top spot among the world's fastest-growing major economies this year. However, it added that the growth maybe restrained by rising trade tensions between the United States and China. Twenty out of 29 economists who answered the survey said India's economy will be hurt by the ongoing trade dispute. Hugo Erken, senior economist at Rabobank said, “India runs the risk of being caught in the middle of the trade spat between the US and China.” He said growth will take a hit if India takes sides as the side not chosen may retaliate by imposing duties.

“The damage would especially be large if India retaliated with an import duty on either US or Chinese imports,” he said. Recent import tariffs imposed by both the countries raise concerns about a full-fledged global trade war which could throw an otherwise-strong world economy off-course. Not all economists share the view though. Nine respondents said the Indian economy would benefit from the dispute. RK Gupta, Managing Director at Taurus Asset Management said, “Though in the short-term a trade war between US and China may impact global trade, including India, in the long-term, India is likely to benefit as China will be forced to devaluate its currency to remain a dominant player in the world market. In that scenario, India's exports will be more competitive with China.”

The latest poll has predicted India's economy to expand 7.4 per cent in the fiscal year that began this month. Growth is expected to average 7.5 per cent for the next fiscal year, lower than the International Monetary Fund's prediction of 7.8 per cent. After growth slowed sharply for much of last year, India regained its status as the world's fastest-growing major economy in the quarter ending December 2017. The initial slowdown was prompted by the government's decision to scrap high-value currency notes in November 2016, and a botched implementation of a goods and services tax in July last year. Nomura's Sonal Verma and Aurodeep Nandi said, “The investment cycle is recovering and there is steady improvement in consumption.”

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