INSUBCONTINENT EXCLUSIVE:
Inflation is forecast to average 4.7 per cent in the fiscal year ending next MarchIndia will claim the top spot among the world's
fastest-growing major economies this year, but rising trade tensions between the United States and China may restrain that growth, a Reuters
poll of economists showed
The recent tit-for-tat import tariffs imposed by the United States and China have raised concerns about a full-fledged global trade war
which could throw an otherwise-strong world economy off-course
Twenty of 29 economists who answered an extra question said India's economy will be hurt by the ongoing trade dispute."India runs the risk
of being caught in the middle of the trade spat between the United States and China," said Hugo Erken, senior economist at Rabobank.Erken
said growth will take a hit if India takes sides as the side not chosen may retaliate by imposing duties."The damage would especially be
large if India retaliated with an import duty on either United States or Chinese imports," said Erken, adding that such a scenario was
unlikely.However, not all economists shared that view
Nine respondents said India's economy would benefit from the dispute."Though in the short-term a trade war between United States and
China may impact global trade including India, in the long-term, India is likely to benefit as China will be forced to devaluate its
currency to remain a dominant player in the world market," wrote RK Gupta, managing director at Taurus Asset Management."In that scenario,
India's exports will be more competitive with China."The latest poll, taken April 11-18, predicted India's economy will expand 7.4
percent in the fiscal year that began this month
That is in line with the International Monetary Fund's projection, and is a slight upgrade from the January poll.For the next fiscal year,
growth is expected to average 7.5 percent, a touch lower than the IMF's forecast of 7.8 percent.After growth slowed sharply for much of
last year, India regained its status as the world's fastest-growing major economy in the quarter ending December 2017.The slowdown was
mainly driven by the government's sudden decision in November 2016 to scrap high-value currency notes and a implementation of a goods and
services tax (GST) in July last year.But the impact of those moves has now faded."The investment cycle is recovering, and there is steady
improvement in consumption," noted Sonal Verma and Aurodeep Nandi at Nomura.Inflation To Push HigherWhile India's retail inflation has
eased this year and hit a five-month low in March, it remained above the Reserve Bank of India's medium-term target of 4 percent.But
increased government spending ahead of national elections next year is yet to kick in and that is expected to be inflationary.Inflation is
forecast to average 4.7 percent in the fiscal year ending next March, and 4.9 percent the following year, the poll showed.The state-run
India Meteorological Department has forecast a normal monsoon in 2018 - a boon for the farm sector that accounts for about 15 percent of
India's $2 trillion economy and employs more than half its 1.3 billion people.A normal monsoon would boost grain production and keep a lid
on food price inflation, which tends to be volatile.The Reserve Bank of India has kept interest rates steady after a 25 basis-point cut to
the repo rate in August last year
It is forecast to keep rates on hold until the second half of next year, according to the poll of almost 50 economists.But economists have
Thomson Reuters 2018(This story has not been edited by staff and is auto-generated from a syndicated feed.)
