The Indian economy off late is on an upward surge. India’s statistics ministry shared positive growth figures for India’s gross domestic product last year. The ministry had used a new methodology to estimate the GDP expansion at 7.5% last quarter (2014-15) and 8.2% the quarter before that. However, economists had initially said that using the traditional method, the growth was 5.5% during the same period.
The International Monetary Fund (IMF) is also optimistic on India’s potential as the fastest growing economy. The IMF pegged its estimate at 7.3% for the year 2015 which is below the 7.5% forecast in the July 2015 World Economic Outlook (WEO) Update. The IMF’s forecast for 2020 sees India occupying the top slot among major economies with a growth rate of 7.7%.
Even, the latest edition of the multilateral lender’s ‘World Economic Outlook—Adjusting to Lower Commodity Prices’ has maintained FY17 forecast at 7.5%.
According to the IMF, the growth will be conducive considering there are recent reforms in policy, more investment, and lower commodity prices. This favorable business climate is also supported by a rising demand for products in India.
For long, India and China have been pegged as the strongest growing economies. However, with the China economy slowing down, India is being considered as a durable spot for economic growth, also one of the fastest emerging economies in the world.
India will also be a catalyst in global economic growth. The global economic growth is expected to slow down, however, China and India will continue to make a significant contribution without any drastic change in growth of China as well.
On the downside, the stress of declining commodity prices, reduced capital inflows, pressure on currencies can pose a risk to the optimistic outlook of the Indian economy. Still, the reduction in inflationary pressure, narrowing of current account deficit has kept the economy growth favorable.
Only recently, there was a situation of massive droughts witnessed in India. However, it continues to show improvement in quality of spending toward capital and agriculture, fiscal consolidation at central and state levels and improvement in indirect tax efficiency, as tweeted by the Chief Economic Advisor Arvind Subramanian.
If we look at the broader picture of the global economy slowdown, the positive economic growth rate for India by leading agencies is only an indication of the strong time ahead.
The international powerhouses from World Bank to Goldman Sachs have indicated that India is on the verge; in another strong declaration it has been stated that India has already dethroned China as the world’s fastest-growing big economy.
This speculation is riding high on the fact that China’s growth has been slowing down. However, this fact can be discarded since China’s economy is four times the size of Indian economy, and as such there has been no drastic fall in its growth. On the other hand, India is heightened as India is moving at a fast pace, while China is slowing down. Even the expansion percentage for the Middle Kingdom’s GDP expansion was 7.3% in both the third and fourth quarters of 2014 has put India in the perspective of the fastest growing economy.