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India could outpace China in growth this year itself

15 April 2015

India could well outstrip its giant neighbour China this year itself in terms of GDP growth, with the International Monetary Fund predicting 7.5 per cent growth this year against China's 6.8 per cent.

With the World Bank predicting similar figures, some see this as the year when India, which touts itself as 'the world's biggest democracy', outpaces China, the world's biggest totalitarian government.

India is set to gain GDP growth ascendancy for the first time since 1999, according to the International Monetary Fund's latest International Economic Update, released on Tuesday.

India's GDP is expected to grow at its fastest for the past five years at 7.5 per cent, while China's slowdown will take it to 6.8 per cent, the lowest since the Tiananmen Square crackdown in 1990, the IMF data showed.

The IMF report said that recent economic reforms embarked upon by India were starting to deliver results.

"Growth will benefit from recent policy reforms, a consequent pickup in investment, and lower oil prices. Lower oil prices will raise real disposable incomes, particularly among poorer households, and help drive down inflation," its report said.

The report said that China's previous "excesses" in real estate credit and investment would continue to unwind, slowing down the rate of growth. But it noted that reforms and lower commodity prices are "expected to expand consumer oriented activities, partially buffering the slowdown".

"For China, the main risk is failure to implement the reform agenda to address financial risks, rebalance the economy, and tap new sources of growth," the IMF said, warning that lower-than-expected growth in China could "affect the rest of the region and the world economy given these economies' large size and deep trade and financial linkages with other nations".

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