According to a latest report titled, ‘Global Economic Prospects’ released by the World Bank, India is projected to grow at a rate of 7.5% in the next 3 years.
The growth will be supported by robust investment and private consumption. The report also said that India grew 7.2% in the fiscal year 2018-2019, ending March 31.
A slowdown in Government consumption was countered by solid investment, which benefitted from public infrastructure spending. China, which had a growth rate of 6.6% in 2018, is projected to witness a downfall and is pegged at 6.2% in 2019. This will further fall down in 2020 and 2021 to 6.1% and 6% respectively. This also implies that India will continue to be the fastest growing emerging economy.
The report read, “Private consumption and investment will benefit from strengthening credit growth amid more accommodative monetary policy, with inflation having fallen below the Reserve Bank of India’s target.”
The World Bank also said that urban consumption in India was supported by an increase in credit growth. The major factor impacting the rural consumption was the softening of agricultural prices. Though the agricultural activity witnessed downfall in production, reflecting subdued harvest in major crops on the back of less rainfalls, the overall growth was taken care by robust growth on production side in industrial sector. The industrial sector was benefited from strong manufacturing and construction and was backed by the robust demand for capital goods. The services activity also softened due to slowing trade, hotel, transport, and communication activity.
Talking of Pakistan, the report says that it will further slowdown to 2.7% in Financial Year (FY) 2019-2020.
Globally, the report has pegged the global growth forecast for 2019 to 2.6% as opposed to 2.9%, announced in January 2019. The global trade growth will be the weakest since the 2008 financial crisis triggered by investment bank, Lehman Brothers.
The Report read, “Global growth in 2019 has been downgraded to 2.6 per cent–0.3 percentage point below previous projections–reflecting the broad-based weakness observed during the first half of the year, including a further deceleration in investment amid rising trade tensions. “In particular, global trade growth in 2019 has been revised down a full percentage point, to 2.6 per cent, slightly below the pace observed during the 2015-16 trade slowdown, and the weakest since the global financial crisis.”
The major reason for the slowing global growth rate is the ongoing trade war between the United States (U.S.) and China. For the records, the Tariff Policy Commission of China’s Cabinet has recently announced that it will increase the tariff on U.S. goods worth U.S. $ 60 billion, from 10% to 25%, from June 1, 2019. This was done in response to U.S.’s move of increasing tariff on Chinese goods worth U.S. $ 200 billion, from 10% to 25%.
The International Monetary Fund (IMF) has also said that the trade war is expected to reduce the global Gross Domestic product (GDP) by 0.3%.
In addition, the President of U.S. – Donald has also said that he is planning to impose 5% tariff on all goods coming in from Mexico to the U.S. The first round of tariffs would begin on June 10, 2019. This would go to 10% by July 2019, 15% by August 2019 and so on until it reaches 25% if, Mexico does not step up its enforcement actions.
