India to play key role in global growth

The Asian Age.

Business, Economy

It expects India’s GDP growth to touch 7.6 per cent in 2017 and accelerate further to 7.8 per cent in 2018.

This will be the first time since 2000’s that a meaningful recovery in EMXC will lift global growth.

Mumbai: Global investment bank Morgan Stanley said that the emerging market excluding China would be the largest contributor to the acceleration in global growth in 2017 and 2018 with India expected to play a key role in the process.

According to it, emerging markets are seeing a rebound in both external and internal demand after four years in the adjustment phase. While growth in EM commodity-importing countries will accelerate modestly, commodity-exporting EMs will accelerate more significantly after painful adjustment in 2015-16.

“Our above-consensus forecast for emerging market excluding China (EMXC) in 2017-18 combined is largely driven by our more positive view on India. We think the demonetisation impact on the Indian economy will fade quicker than expected and exports and investment growth will be more supportive,” Morgan Stanley said.

It expects India’s GDP growth to touch 7.6 per cent in 2017 and accelerate further to 7.8 per cent in 2018. On the other hand, China’s growth is likely to drop to 6.4 per cent in 2017 and 6.2 per cent in 2018.

The most recent period characterised by an EMXC-driven improvement in global growth and improving macro stability was during the 2000s.

This will be the first time since 2000’s that a meaningful recovery in EMXC will lift global growth.

While most EMXCs have already made a significant correction to macro policies, driving a major improvement in their macro-stability indicators, Morgan Stanley said they still need to stay on the path of gradual implementation of the three key policy reforms — fiscal consolidation, public infrastructure spending and management of financial stability risks.

“India has already embarked on gradual fiscal consolidation as the central government aims to cut the fiscal deficit to 3.2 per cent of GDP for FY18 from 3.5 per cent in FY17. For India, our base case assumes continued implementation of infra projects,” it said.

Read more...