India remains fastest growing economy ahead of China
New Delhi: India remained ahead of China to retain the tag world’s fastest growing large economy withstanding several ups and downs, spike in oil prices and global trade war like situation during 2018.
Indian economy’s roller-coaster ride during the year gone by was best captured by the GDP growth. In the first quarter of 2018-19 ending June 30, it grew at an impressive 8.2 per cent, after 7.7 per cent in the first three months of the year.
Then it slipped to 7.1 per cent in the next quarter ending September 30. Fitch Ratings slashed India’s GDP growth forecast to 7.2 per cent for the current fiscal, from 7.8 per cent projected in September, citing higher financing cost and reduced credit availability.
According to Niti Aayog Vice-Chairman Rajiv Kumar, the focus of the government in 2019 will be to expedite reforms with a view to accelerate growth.
“India will grow at around 7.8 per cent in the next calendar year and investment cycle that has already started picking-up will gather further strength and we will see more private investments,” Kumar said.
Experts, however, expect that moderating growth can force the government to spend more before the next general elections and that could lead to fiscal pressures.
Global factors such as sudden zoom in crude prices (which are now easing), strengthening US dollar, slowing growth in the wake of US-China trade war and the US Federal Reserve hiking interest rate for the fourth time in a year did take the toll on India’s economy.
The banking sector ruled the headlines in 2018. The year opened with India’s biggest banking scam coming to light. On February 14, state-owned Punjab National Bank said it had detected a Rs 11,400 crore scam where billionaire-jeweller Nirav Modi allegedly acquired fraudulent letters of undertaking from a branch in Mumbai to secure overseas credit from other Indian lenders.
The case has gathered a long political traction, with the government making little progress in bringing back the absconding accused.
The year ended with a rare face-off between the Reserve Bank of India and the Central government. Urjit Patel’s resignation a few weeks later was seen as a culmination of the tussle in December.
The main trigger was government’s demand to relax restrictions on weak public-sector lenders, which slowed down credit growth. For the first time, the government threatened to use its special powers under Section 7 of the RBI Act. The cycle of events at the RBI brought to the fore concerns about the RBI’s autonomy.