India to remain fastest growing economy among G-20 nations

The Dollar Business Bureau

Despite the government’s currency demonetisation drive, India will continue to be the fastest growing economy among G-20 countries registering a 7.1% growth this year, Moody's Investors Service said on Thursday. 

The November 8 currency blackout decision pulled down the Indian economic growth in the fourth quarter this fiscal. The government withdrew as much as 86% of the Rs.500 and Rs.1000 notes from circulation. 

"India is forecast to have the fastest-growing economy among all G-20 countries with growth put at 7.1% for 2017, down from a previous expectation of 7.5% because of the effects of demonetisation," Moody's said.  

With respect to the global economic growth, Moody's noted that although the economic activity in G20 countries is picking up, with 3% projected growth in 2017 and 2018, up from 2.6% in 2016, the unpredictable economic policy of the US could pose some uncertainty to the projected growth.  

"We note unusually high uncertainty around our global forecasts due to the wide range of outcomes that could arise from significant shifts in US policy on a number of domestic and international issues including trade and immigration," Moody's VP and Senior Analyst Madhavi Bokil said. 

The report titled 'Modest Acceleration in the Global Economy, but Shifting US Policies Inject Uncertainty', underscored that the protectionist trade policy adopted by the US could inflict economic damage to the global economy.  

Regarding Asia, the report observed that China's economy has stabilised around the target of 6.7% in 2016 but may continue to decelerate to 6.3% and 6% in 2017 and 2018.

Moody's expects that the US’s stimulated fiscal policy stance would give a boost to its economic growth. Moody's has revised the US’s GDP growth forecast to 2.4% in 2017 and 2.5% in 2018, from 2.2% and 2.1%, respectively. 

The report also says that the US Federal Reserve will increase the federal fund's rate by 75-100 basis points in 2017. "We expect the Fed to err on the side of caution and tolerate somewhat above-target inflation in the near term," it said.