At present, it is forecasted that India will rank first among the fastest growing major economies of the world this year. However, the rising tensions between China and United States trading might affect the growth rate and the restraint might intensify, as per a poll of Economists held by Reuters.
Recently, United States and China both imposed import tariffs in a tit-for-tat situation. This has raised concerns about a global trade war that is gaining momentum. In turn, such a situation could derail an otherwise strong global economy.
Majority of the economists of the poll were of the opinion that India will be take a hit from the ongoing trade tensions. Hugo Erken, senior economist at Rabobank stated that India is at risk of being stuck in the middle of the trade dispute between China and the US. If India takes a side, the other country might counter by imposing duties. This will affect India’s economy greatly.
Some economists were of the opinion that India might benefit from the spat. RK Gupta, manging director at Taurus Asset Management, stated that in the short-term, the current trade war between US and China will impact worldwide trade including India. However, in the long run, China will be forced to devaluate its currency in order to maintain its dominance in the global market. This will likely be beneficial to India. In this case, exports from India will have a more competitive stance in China.
As per the latest poll taken between 11-18 April, India’s economy is predicted to grow by 7.4% in the current fiscal year. This figure is on par with the projection from the International Monetary Fund. The growth rate is projected to average 7.5% for the next fiscal year, which is slightly lower than the IMF’s prediction of 7.8%.
Though the growth rate slowed down for majority of the previous fiscal year, India managed to regain it’s rank as the fastest growing economy of the world in the quarter that ended December 2017.