India will remain to be the fastest-growing economy this year clocking a growth rate of 7.2 per cent in 2019-20, despite risks of a global slowdown, financial markets and crude price volatility, according to the Reserve Bank of India governor Shaktikanta Das.
He called for greater co-operation among emerging market economies on all fronts which will help them be better off in this uncertain environment.
“Real GDP growth is expected to clock 7.2 per cent during 2019-20, the fastest among large economies of the world, growing by an average rate of around 7.5 per cent in recent years” said Das at the event “Governor Talks” on the sidelines of the Fund-Bank Spring Meetings, 2019, Washington DC.
As for the other macro-economic parameters, inflation has remained below target, averaging 3.6 per cent for the period under the inflation targeting framework so far (since October 2016 up to February 2019); the current account deficit is expected to be around 2.5 per cent of GDP in 2018-19; and the gross fiscal deficit has adhered to budgetary targets.
Going by the low inflation print, the Reserve Bank of India had lowered its benchmark repo rate, the rate at which it lends to banks by 25 basis points, in its bi-monthly policy review on April 4, last week.
The biggest risk facing these economies is the growing evidence that global growth and trade is weakening. Unsettled trade tensions and developments around Brexit are imparting further downside risks to the outlook,
The risk of sudden stops and reversals of capital flows has increased. As a result, external financing gaps and currency depreciation could undermine the outlook for growth and macroeconomic stability for emerging market economies, just when global growth had begun to show signs of a synchronised revival a decade after the global financial crisis, according to Das.
Moreover, for net energy importers like India, the recent firming up of oil prices on production cuts by major suppliers presents risks to current account deficit and inflation.
“In this high flux and uncertain environment, EMEs could perhaps be better off by stepping up cooperation on all fronts, while recognising multi-polarity” Das said adding that one area of cooperation could be to put in place an institutional mechanism which balances the concerns of both oil exporting and importing countries to ensure stability in energy prices. “EMEs also need to explore alternatives to reduce dependence on conventional energy sources, and give greater focus on renewable and energy efficiency.”