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BUSINESS REVIEW GENERAL ECONOMY

Global economic activity continues to rm up. Global output is estimated to have grown by 3.7 percent in 2017, which is 0.1 percentage point faster than projected in the fall and percentage point higher than in 2016. The pickup in growth has been broad based, with notable upside surprises in Europe and Asia. Global growth forecasts for 2018 and 2019 have been revised upward by 0.2 percentage point to 3.9 percent. The revision re ects increased global growth momentum and the expected impact of the recently approved U.S. tax policy changes.

Risks to the global growth forecast appear broadly balanced in the near term, but remain skewed to the downside over the medium term. On the upside, the cyclical rebound could prove stronger in the near term as the pickup in activity and easier nancial conditions reinforce each other. On the downside, rich asset valuations and very compressed term premiums raise the possibility of a nancial market correction, which could dampen growth and con dence. The current cyclical upswing provides an ideal opportunity for reforms.

Global growth for 2018 is now estimated at 3.7 percent, 0.1 percentage point higher than projected in the fall. Upside growth surprises were particularly pronounced in Europe and Asia but broad based, with outturns for both the advanced and the emerging market and developing economy groups exceeding the fall forecasts by 0.1 percentage point. The stronger momentum experienced in 2018 is expected to carry into 2019, with global growth revised up to 3.9 percent for both years (0.2 percentage point higher relative to the fall forecasts).

For the next year forecast horizon, the upward revisions to the global outlook result mainly from advanced economies, where growth is now expected to exceed 2 percent in 2019. This forecast re ects the expectation that favorable global nancial conditions and strong sentiment will help maintain the recent acceleration in demand, especially in investment, with a noticeable impact on growth in economies with large exports.

Indian Economy

Recent data suggests that the economic recovery that took hold in Q3 FY 2017 remained intact in the last quarter of the scal year, which runs to March 2018. Consumer data was encouraging through the quarter, with both urban and rural demand picking up on ebbing e ects from major reforms including demonetization and the implementation of GST and higher credit growth. A cyclical recovery in investment is also underway, chie y fueled through higher utilization of existing capacity. Nonetheless, optimism remains checked by growing imbalances, mainly related with a widening trade de cit; a mildly expansionary scal stance; and numerous risks to in ation.

The economic turnaround is expected to gain further traction this scal year. Notwithstanding reports of a cash crunch in several states, a normalization in cash conditions and the fading of GST disruptions should facilitate the economy’s recovery. A FY 2018 budget skewed to bene t rural incomes will also boost private spending. Nonetheless, risks of scal slippage and concerns over India’s banking sector cloud the outlook. There was a growth of 7.3% in FY 2018. Expected growth in FY 2019 in GDP expansion of 7.5%.