Washington: The International Monetary Fund (IMF) on Tuesday forecasted a growth rate of 7.3% for India in the current year of 2018 and that of 7.4% in 2019.

In 2017, India had clocked a 6.7% growth rate.

"India's growth is expected to increase to 7.3% in 2018 and to 7.4% in 2019 (slightly lower than in the April 2018 World Economic Outlook [WEO] for 2019, given the recent increase in oil prices and the tightening of global financial conditions), up from 6.7% in 2017," the IMF said in its latest World Economic Outlook report.

This acceleration, the world body said, reflected a rebound from transitory shocks (the currency exchange initiative and implementation of the national Goods and Services Tax), with strengthening investment and robust private consumption.

India's medium-term growth prospects remain strong at 7 %, benefiting from ongoing structural reform, but have been marked down by just under percentage point relative to the April 2018 WEO, it said.

If projections are true, then India would regain the tag of fastest-growing major economies of the world, crossing China with more than 0.7 percentage point in 2018 and an impressive 1.2 percentage point growth lead in 2019.

China was the fastest growing economy in 2017 as it was ahead of India by 0.2 percentage points. For the record, the IMF has lowered the growth projections for both India and China by 0.4 % and 0.32 %, respectively, from its annual April's World Economic Outlook. 

Released in Bali during the annual meeting of the IMF and the World Bank, the IMF's flagship World Economic Outlook said its 2019 growth projection for China is lower than in April, given the latest round of US tariffs on Chinese imports, as are its projections for India.

In China, growth is projected to moderate from 6.9% in 2017 to 6.6% in 2018 and 6.2% in 2019, reflecting a slowing external demand growth and necessary financial regulatory tightening, the report said. 

The 0.2percentage point downgrade to the 2019 growth forecast is attributable to the negative effect of recent tariff actions, assumed to be partially offset by policy stimulus, it said.

Over the medium term, growth is expected to gradually slow to 5.6% as the economy continues to make the transition to a more sustainable growth path with continued financial de-risking and environmental controls, it noted.

"Owing to these changes, our international growth projections for both this year and next are downgraded to 3.7 %, 0.2 percentage point below our last assessments and the same rate achieved in 2017," the report said.

The growth rate of United States for 2018 is 2.9 % and   2.5%  for 2019.

In India, the report said, important reforms have been implemented in the recent years, including the Goods and Services Tax, the inflation-targeting framework, the Insolvency and Bankruptcy Code, and steps to liberalise foreign investment and make it easier to do business.

"Looking ahead, the renewed impetus to reform labour and land markets, along with further improvements to the business climate, is also crucial," it said.

According to the World Economic Outlook, in India, reform priorities include reviving bank credit and enhancing the efficiency of credit provision by accelerating the cleanup of the bank and corporate balance sheets and improving the governance of public sector banks.

In India, a high-interest burden and risks from rising yields require continued focus on debt reduction to establish policy credibility and build buffers. 

"These efforts should be supported by further reductions in subsidies and enhanced compliance with the Goods and Services Tax," the IMF report said.

It also said inflation in India is on the rise, estimated at 3.6% in fiscal year 2017/18 and projected at 4.7% in fiscal year 2018/19, compared with 4.5 % in fiscal year 2016/17, amid accelerating demand and rising fuel prices.

The report said that aggregate growth in the emerging market and developing economy group stabilised in the first half of 2018.

Emerging Asia continued to register strong growth, supported by a domestic demand-led pickup in the Indian economy from a four-year-low pace of expansion in 2017, even as activity in China moderated in the second quarter in response to the regulatory tightening of the property sector and nonbank financial intermediation, it said.

The IMF has cut its global growth forecasts as trade tensions between the US and trading partners have started to hurt economic activity worldwide. According to the fund's latest World Economic Outlook report released on Tuesday, the IMF says the global economy is now expected to grow at 3.7 % this year and next year — down 0.2 % points from an earlier forecast.

The World Economic Outlook is published twice a year in April and October and is widely read by both the public and private sectors globally for their assessment of the world economy.