by Pavas Gupta
If the IMF’s forecasts are correct, India is set to have good growth this fiscal year. At the same time, it battles a market and currency slump. Read ahead to find out more about last week’s economic news:
IMF: India’s growth rate at 7.3% in 2018, 7.4% in 2019
On Tuesday, the International Monetary Fund (IMF) projected a growth rate of 7.3% for India in the current fiscal year, and 7.4% in 2019. In 2017, India had a growth rate of 6.7%.
“India’s growth is expected to increase to 7.3 per cent in 2018 and to 7.4 per cent in 2019 (slightly lower than in the April 2018 World Economic Outlook [WEO] for 2019, given the recent increase in oil prices and the tightening of global financial conditions), up from 6.7 per cent in 2017,” the multi-national agency said in its latest WEO report.
According to the world body, this acceleration echoed a rebound from transitory shocks such as the currency exchange initiative and the implementation and of the nation-wide Goods and Services Tax, along with strengthening investment and robust private consumption.
Finance Ministry: Market, rupee slump because of external factors
In an attempt to assuage the jittery market, a senior Finance Ministry official assured that there was a strategy in place and appropriate steps would be taken at the right time to bolster the stock market sentiments. He also expressed hopes of crude oil prices stabilizing.
“Rupee, Balance of Payments, Current Account Deficit are the main worries, we have strategy in place to tackle [the] situation. We will take action at opportune time on these issues,” the official said. He claimed that the Indian market was relatively stable compared with other equity markets. “The rupee may remain firm if oil prices stay range-bound. We do believe that the rupee should appreciate from this level,” the official added.
Experts claim worst not yet over for rupee
According to experts, the rupee has not seen its worst yet, as foreign money rushes out of equities and debt in the midst of sticky oil prices.
On Thursday, the fiat had plunged to a record-low of 74.48 against the greenback.
Unabated foreign capital outflows prove to be an area of concern for market participants. So far in October, Foreign Institutional Investors (FIIs) have off-loaded shares worth over Rs 14,000 crore.
“The rupee continues to make a new record low as global and domestic equities experienced a steep sell-off. Continued FII outflows from debt and equity market is keeping sentiment bearish. Though the crude oil prices have eased overnight, it is temporary. As US sanctions on Iran begin from November, crude oil prices might continue to rise in the international market. This may pressure the rupee in coming sessions,” said Rushabh Maru, Research Analyst, Anand Rathi Shares and Stock Brokers. “The focus would now shift to India’s macroeconomic data that will give further direction to the rupee,” he added.
Farm exports to China might reap benefits from India’s deficit
India might benefit by expanding agricultural exports to China, thereby exploiting opportunities from a global trade war to help bridge its own deficit. The exports include soybean and cotton.
In recent months, China has emerged as the top market for India’s overall export growth. Between April and August, India’s exports to China grew an average 52.9% year-on-year, far more compared to other countries.
Pavas Gupta is a writing analyst at Qrius
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