Mumbai :Global growth will keep a steady pace this year and next, buoyed by stronger trade and US fiscal stimulus that will fade by the early 2020s, while increased tariffs could damage market confidence and output, the International Monetary Fund said .
The IMF, in its latest World Economic Outlook, kept its 2018 and 2019 global growth forecasts unchanged at 3.9% for both years after upgrades in January.
The projections were released as thousands of global finance officials were gathering in Washington for the IMF and World Bank spring meetings this week.
The IMF said it raised its US growth forecast by 0.2 percentage point for both years, to 2.9% for 2018 and 2.7% for 2019. It said lower US corporate income tax rates and accelerated investments due to a temporary tax break would boost US growth through 2020, but these effects would then reverse quickly, causing a slowdown.
“Global growth is projected to soften beyond the next couple of years,” the IMF said in the report, adding that advanced economies would be “held back by aging populations and lackluster productivity.”
The Trump administration has maintained that Republican tax cuts passed last year would allow the United States to maintain sustained gross domestic product growth above 3 percent for years and defy forecasts that US budget deficits will balloon over the coming decade.
For now, the IMF said increased export demand was contributing to slight growth forecast upgrades for the euro area and Britain for 2018, while the IMF kept its forecasts unchanged for Japan, China, India, Russia and Mexico.
Forecasts were cut slightly for Canada, the Middle East and North African countries, as well as a number of low-income developing countries.
The IMF said prospects for developing economies to grow per-capita incomes face difficult prospects over the next five years, especially in commodity-exporting countries in the Middle East, sub-Saharan Africa, Latin America and the Caribbean.
Risks to the global growth forecasts were broadly balanced for the next few quarters, with the potential for stronger business profits to increase hiring and investments that could boost productivity, the IMF said.
But trade tensions, such as the United States and China’s recent dueling tariff announcements, could take a direct toll on trade and economic activity and also cause financial market turmoil that would tighten financial conditions and hurt confidence.
“An increase in tariffs and non-tariff trade barriers could harm market sentiment, disrupt global supply chains, and slow the spread of new technologies, reducing global productivity and investment,” the IMF said. “Greater protectionism would also lower consumer welfare by making tradable consumer goods more expensive.”
Research from 2016, the IMF said, showed that tariffs or other barriers that led to a 10% increase in import prices in all countries would lower global output and consumption by about 1.75% after five years and close to 2% in the long term. Global trade would fall 15% after five years and 16% in the long run under such a scenario, it said.
Cabinet clears setting up of centralised GST appellate authority
New Delhi: The Union Cabinet on Wednesday approved setting up of a centralised Appellate Authority for Advance Ruling (AAAR) under the goods and services tax that would decide on cases where there are divergent orders at the state level.
The setting up of a centralised AAAR would require amendments to the GST Acts. The centralised authority as an appellate body will only take up cases wherein the Authority for Advance Ruling (AAR) of two states have passed divergent orders.
The Goods and Services Tax (GST) Council, headed by Finance Minister Arun Jaitley, and comprising state counterparts, in December decided to establish the centralised AAAR.
“The Cabinet has cleared the GST appellate authority,” a source said after the meeting of the Cabinet headed by Prime Minister Narendra Modi.
In view of the confusion created by contradictory rulings given by different AARs on the same or similar issues, the industry had been demanding a centralised appellate authority that could reconcile the contradictory verdicts of different AARs.
Urbanisation to be big driver of Indian economic growth: Kant
Davos: Urbanisation will be a big driver of economic growth in India going forward, supported by favourable macroeconomic factors, accelerated infrastructure building and continuing reforms, NITI Aayog CEO Amitabh Kant said.
Speaking here at an event on sidelines of the World Economic Forum Annual Meeting, he also said the Indian economy may even exceed the IMF growth forecast of 7.5 per cent for the country.
Kant said IMF has forecast 7.5 per cent growth for India despite a gloomy outlook for the global economy and this itself is good, though there are expectations that this estimate would be surpassed. He said India is giving a big push to urbanisation with more than 100 smart cities being developed.
The country is also using technology in a big way to change the way business and governance is done, he added. Besides a massive infrastructure building is happening, bank credit flow has rebounded and macroeconomic factors like inflation and fiscal deficit are also being supportive, Kant said.
DIPP Secretary Ramesh Abhishek noted that states are competing with each other to attract investments and all political parties have adopted the economic reform process. He listed various reform initiatives undertaken in India, including on areas like ease of doing business, FDI, manufacturing and taxation.
They were speaking at Institutional investors’ breakfast roundtable, organised by the industry chamber CII and Kotak Mahindra Bank. Other participants included CII Director General Chandrajit Banerjee and leaders from Indian and foreign companies.
On questions about some persisting issues in doing business including on tax and insolvency related issues, Abhishek said a lot of efforts have been put in to remove all bottlenecks and starting a business doesn’t take more than a day. Besides, special provisions have been made for startups and angel investors, he added.
Kant said efforts are also being made to remove all physical intervention and digitise the entire process of inter-ministerial and inter-department consultations to fast-track the decisions.
India will surpass China, says Raghuram Rajan
Davos: India will eventually surpass China in economic size and will be in a better position to create the infrastructure being promised by the Chinese side in South Asian countries, former RBI Governor Raghuram Rajan said.
Addressing a session on Strategic Outlook for South Asia, Dr Rajan said that the Indian economy would continue to grow while growth rate is slowing down in China.
“Historically, India had a bigger role in the region but China has now grown much bigger than India and has presented itself as a counter-balance to India in the region,” Dr Rajan said at the WEF Annual Meeting 2019.
“India will become bigger than China eventually as China would slow down and India would continue to grow. So India will be in a better position to create the infrastructure in the region which China is promising today. But this competition is good for the region and it will benefit for sure,” he said.
The comments assume significance with China working on a lot of infrastructure projects across the region. In 2017, India became the sixth largest economy with a GDP of $2.59 trillion while China was the second large with a GDP of $12.23 trillion.
At the same session, Nepal PM K.P. Sharma Oli cited collaboration with China as well as India as reasons for the economic growth.