The World Bank, in its recently released Global Economic Prospects Report - January 2019, has sketched a gloomy outlook for the global economic growth in the coming years, reiterating the fears of global slowdown, however, it expects India to remain the fastest growing emerging market economy.
Worries over trade war, weak global growth and financial stress in the developing economies are likely to weigh on global growth outlook. For 2018, the global growth estimate has been revised downwards by 0.1 percentage point from 3.1 per cent as per June 2018 report to 3 per cent in January 2019 report.
Likewise, in 2019, the global economic growth is projected to grow by 2.9 per cent compared with earlier estimates of 3 per cent amid softer international trade and manufacturing activities, elevated trade tensions and financial market pressures in some of the emerging market economies. In 2020 and 2021, the global economic growth has been forecast at 2.8 per cent each year, 0.1 percentage point lower than earlier projections.
Despite all odds, India is expected to remain the fastest growing emerging market economy and its growth forecast has been kept unchanged at 7.3 per cent in FY19 while the economy is expected to grow at 7.5 per cent in the next 3 years.
Real GDP growth (%); e: estimates; f: forecast, * for the corresponding financial year ; Source: Global Economic Prospects report
As per the report, the domestic demand in India is improving owing to structural reforms undertaken by the country recently and a revival in credit growth. India's growth is expected to be at 7.3 per cent in FY19, making it the fastest growing emerging economy, as economic activity has showed sustained recovery with strong domestic demand. While investment continued to strengthen amid GST harmonisation and a rebound of credit growth, consumption remained the major contributor to growth. Private consumption is projected to remain robust. As per the World Bank's estimates, current account deficit is expected to widen to 2.6 per cent of GDP while the inflation is projected to rise somewhat above the midpoint of the Reserve Bank of India's target range of 2-6 per cent, mainly owing to energy and food prices.
However, the risks to the projected growth could arise from fiscal slippages, rising inflation and possibility of delays in structural reforms to address the weakness in the balance sheets of banks and non-financial corporates. The external risks pertain to a further deterioration in current accounts and a faster than expected tightening of global financial conditions. CARE Ratings expects GDP to grow by 7.4 per cent in FY19, current account deficit between 2.25- 2.5 per cent of GDP and retail inflation to average 4 per cent for the remainder of the FY19.