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India set to be world's fastest growing economy

Dubai - This 6 per cent growth of India will be at par with China's growth for 2020 predicted by the IMF.

India's economic growth is bouncing back as the slump bottoms out, with a projected growth of 6 per cent in the 2020-21 fiscal year, making the South Asian country the fastest growing economy in the world.

Sanjeev Sanyal, principal economic adviser at the Indian finance ministry, on Tuesday said economic growth was set to accelerate to 6 per cent in the financial year beginning in April, compared with estimated growth of 5 per cent in the current one.

This 6 per cent growth of India will be at par with China's growth for 2020 predicted by the International Monetary Fund (IMF) in its latest report released last month. The IMF predicted 5.8 per cent and 6.0 per cent growth for India and China, respectively, in 2020. But the Chinese economy is facing severe headwinds from the coronavirus outbreak. Hence, some analysts have already revised down its growth outlook for 2020.

Capital Economics has slashed its forecast for China's first-quarter growth from five per cent to three per cent year-on-year.

"The inherent uncertainty surrounding the spread of the virus makes it virtually impossible to quantify the wider impact on the world economy. But China's role at the centre of global supply chains increases the likelihood that the disruption spreads to other countries. Economies in Emerging Asia look most vulnerable, as do firms operating in both the tech and electronics sectors," said Neil Shearing, group chief economist at Capital Economics.

As per IMF's forecast for 2021, India will be the fastest growing country among major global economies next year at 6.5 per cent followed by China at 5.8 per cent and other major economies between 1 to 2 per cent.

Indian finance minister Nirmala Sitharaman told parliament during her budget speech that the signs of "green shoots were visible" and the economy was no longer in trouble.

"While there was a slowdown, this slowdown has by and large now bottomed out, and if anything from here on, growth is going to go up," Sanyal said.

The adviser said inflation would fall to four per cent in the next financial year beginning April, after a recent spike driven largely by food prices. But there is enough space for the central bank to further cut interest rates, however, as inflation was likely to ease following a fall in vegetable prices.

He noted that more banking funds will be available for private companies despite higher state borrowing as the budget offered tax incentives to sovereign wealth funds insurance funds.

Apart from coronavirus outbreak in China, Sanyal doesn't see any other major disruption to India's economic growth.

Tushar Pradhan, chief investment officer at HSBC Global Asset Management in India, said there will be some hiccups over the next 3 to 5 years and things will be dramatically challenging, but India has tremendous potential in next few years. "We should look India over the next 5 to 10 years and beyond. The reforms have taken place and we will see dramatic changes coming up such as lowering of interest rate and government revenues going up," Pradhan said while addressing The Indian Institute of Chartered Accountants (ICAI) - Dubai Chapter, on Monday.

He said India will remain traditional growth-oriented economy over the next decade or so.

Tushar noted that India will surpass China's growth as was the case last year.

"It is likely as we were ahead of China last year. These two giants will run neck to neck in coming," he added.

Paras Shahdadpuri, chairman of Nikai Group, said target set by BJP government to become $5 trillion economy by 2024 is an uphill task.

"If world economy looks up, though it has shrunk below 3 per cent, then India looks better. If India ever has dreamt to be a superpower, then we must focus on industries. I don't see any developed county, be it Japan, US, UK etc., which has not focused on manufacturing industry. India's industry contribution to its GDP is very low at below 25 per cent and it must reach 35 per cent. Some good sops needed to be given to industrial sectors," Shahdadpuri said during the panel discussion at ICAI conference on the Indian budget.

waheedabbas@khaleejtimes.com