India will surpass Germany as the world’s fourth-largest economy by 2022 and push UK out of the top five in 2017, according to an analysis of growth projections by the International Monetary Fund
India will surpass Germany as the world’s fourth-largest economy by 2022 and push the UK out of the fifth rank in 2017, according to an analysis of growth projections by the International Monetary Fund, said Mint in a report.
However, according to the IMF analysis, India has to address a lot of issues in order to make the climb. These include implementing the Goods and Services Tax (GST), dealing with the biggest bunch of stressed assets among all major economies across the globe, increasing productivity and employment opportunities, encouraging corporate investment and overcoming a shortfall of infrastructure.
The report said that India’s economy is still recovering from the effects of the note ban imposed by the government in November when the government decided to demonetise currency notes of Rs 500 and Rs 1000 denominations.
Despite agreeing that GST will be beneficial for the Indian economy in the long run, most economists are concerned about the health of the country’s banking system and its public finances. Both these factors are significant points of concern since most global credit rating agencies already rate Indian debt instruments just above ‘junk’ status.
The report also said that according to government data, bad loans, restructured debt and advances to companies that cannot service their debt have risen to 16.6 percent of total loans. This has prompted banks to address their asset quality and has forced them to focus on recovery of these loans, which has, in turn, left their loan growth in the doldrums.
Also, in addition to slowing investment, India’s labour productivity has been continuously weakening, thereby limiting growth and employment opportunities, the report said. According to the International Labour Organisation, India’s output per worker is projected at USD 3,962, a mere fraction of Germany’s USD 83,385.
However, even considering all these factors, one cannot ignore the IMF forecast, which pegs India growing at 9.9 percent in nominal terms. Going by that, India is slated to overtake Germany by 2022 and to push the UK out of its fifth rank by the end of 2017.