Gdp Growth In India To Stabilize At 7.34% In The Medium Term - Imf

IMF links the growth rate in the Indian economy to rise and fall of crude oil prices and hence the economy has slowed down in 2017 and 2018.The crude oil prices are expected to weaken in2019 and 2020, and hence the GDP growth is expected to rise. The real GDP growth will move up to 7.3% in the current fiscal from 7.1% in 2017-18, and stabilize at 7.34%. Inflation is expected to increase from 3.5% in the last fiscal to 3.9% in 2019. This is still below the RBI’s target of 4%. This would keep the interest rates low. It has been advised that there should be, continued implementation of structural and financial sector reforms, increased compliance of GST and reduction in subsidies.

IMF is an international organization consisting of 189 countries formed to promote monetary and economic cooperation. They have made the above observations about Indian economy. IMF thinks that the crude prices will weaken in 2019-2020, which would keep inflation at bay and help in the GDP growth of the country. If the inflation is low RBI doesn’t raise its interest rate at which it lends to banks. Due to this the loans available to public would be cheap. Structural and financial sector reforms like accelerated resolution of NPAs, reduction in public debt would help in sustaining the growth. Owing

There are however issues raised by IMF, on the way GDP is calculated in India. Similar issues have been pointed out by our ex-RBI Governer Raghuram Rajan. He says that, if the economy was growing at 7%, there would be no dearth of jobs in India. But given that there is dearth of jobs, the economy could not be growing at 7%. Another issue pointed out was, in the way GDP is calculated. The variable ‘deflator’ needs to be incorporated. The GDP is calculated using the current price of goods and services in India. However, the growth in the value could also be due to rise in prices, that is due to inflation.

Though, it is unclear that what the exact rate at which India is growing, the feel that India gets, as an emerging power, world support for ex-Pulwana surgical strikes, Moody’s change of India’s Ratings and Fitch’s not downgrading of India’s rating are other variables that indicate growth.