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`sinflation-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.
“South Asia, meanwhile, continues to be the fastest growing sub-region, led by India, whose economy is on track to meet fiscal year 2018 projected growth of 7.3 percent and further accelerating to 7.6 percent in 2019, as measures taken to strengthen the banking system and tax reform boost investment,” it said.
The ADO published in April had said that India’s economic growth will rise to 7.3 percent this fiscal and further to 7.6 percent in the next financial year, retaining the fastest-growing Asian economy tag, on back of GST and banking reforms