India to Surpass China in Economic Growth, Says IMF - Global Trade Magazine
  April 16th, 2015 | Written by

India to Surpass China in Economic Growth, Says IMF

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  • IMF: India’s economic growth to surpass China’s.
  • India’s expected economic rate of expansion revised from 6.3 percent to 7.5 percent.
  • China’s economic growth drops from 7.4 percent in 2014 to 6.8 percent this year, expected to be 6.3 percent in 2016.

India’s economy will dominate Asia through this year and the next with a surge in growth expected to surpass that of China, currently the dominant economy in the region, according to the International Monetary Fund’s latest World Economic Outlook.

In a surge forming at a much faster rate than previously forecasted, the Subcontinent can be expected to expand 7.5 percent in 2015, up from a 6.3 percent prediction made in January, and remain the same next year. The IMF had previously pegged the country’s 2016 economic expansion at 6.5 percent.

The IMF forecast China’s economic growth would ease further to 6.8 percent this year from 7.4 percent last year, and slip to 6.3 percent in 2016.

India’s economic expansion is a direct result of “recent policy reforms, a consequent pick-up in investment, and lower oil prices,” the Washington-based IMF says.

India, a major oil importer, will continue to benefit hugely from tumbling oil prices which have helped to cool its once stubbornly high inflation, it adds, saying that lower oil prices “will raise real disposable incomes, particularly among poorer households, and help drive down inflation.”

 

NEW REFORM POLICIES HAVE BOLSTERED INVESTOR CONFIDENCE

Ther IMF lauded India’s Prime Minister, Narendra Modi, whose government has begun to cut diesel subsidies to reduce its massive subsidy bill, with the ongoing downward slide in oil prices soon to soften the effect on farmers and other groups who rely on the fuel.

Modi was also cited for lifting the cap on foreign investment in the defense and insurance sectors and putting in place a series of other initiatives since winning last year’s general election on a pledge to reform and revive the economy.

The figures have surprised many economists. Under the previous left-leaning government, India had been struggling through what many considered its worst economic slowdown since the 1980s. Some observers feel that Modi’s reforms have not been as bold as many businesses wanted, but the right-wing government’s ongoing emphasis on pro-business policies “has bolstered investor confidence,” the IMF says.

One such investor is Ford, which recently started up operations at a new $1 billion auto-assembly facility in the western Indian State of Gujarat. The site has a potential capacity of 240,000 vehicles and 270,000 engines annually.

Ford was motivated by the expectation that automotive demand in India will pick up in the country, as Indian consumers grow more prosperous and trade their two-wheeled scooters and motorcycles, the dominant mode of motorized transportation, for small cars.


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