India's economy is projected to grow 7.6% in fiscal year 2018-19, remaining the fastest growing economy in the world, as robust private consumption and benefits from past reforms help the country's GDP gain momentum but sustained recovery in private investment remains a crucial challenge, according to a UN report.

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The UN World Economic Situation and Prospects (WESP) as of mid-2018, launched here today, said GDP growth in India is expected to climb to 7.5 and 7.6% in fiscal years 2017-18 and 2018-19 respectively. This is a substantial recovery from the 6.7% growth India registered in fiscal year 2017.

"Among the major economies, growth in India is gaining momentum, underpinned by robust private consumption, a slightly more supportive fiscal stance and benefits from past reforms," the report said.

It added that although capital spending has shown signs of revival, a more widespread and sustained recovery in private investment remains a crucial challenge in India.

In China, growth is expected to remain solid, supported by robust consumer spending and supportive fiscal policies. Amid ongoing structural reforms, growth in the Chinese economy is projected to gradually moderate from 6.9% in 2017 to 6.5% in 2018 and 6.3% in 2019.

While ongoing efforts to address financial vulnerabilities will contribute to more sustainable medium-term growth, the authorities face the policy challenge of ensuring that associated deleveraging does not derail growth in the short term.

The report added that growth in the world economy is surpassing expectations and global GDP is now expected to expand by more than three per cent this year and in 2019, reflecting strong growth in developed countries and broadly favourable investment conditions.

However rising trade tensions, heightened uncertainty over monetary policy, increasing debt levels and greater geopolitical tensions can potentially thwart progress, according to the report.

World economic growth is now forecast to reach 3.2% both in 2018 and 2019, an upward revision by 0.2 and 0.1 percentage points, respectively.

This revised outlook reflects further improvement in the growth forecast for developed economies due to accelerating wage growth, broadly favourable investment conditions, and the short-term impact of a fiscal stimulus package in the US.

World trade growth has also accelerated, reflecting a widespread increase in global demand. Many commodity-exporting countries will also benefit from the higher level of energy and metal prices.

While the modest rise in global commodity prices will exert some upward pressure on inflation in many countries, the report notes that inflationary pressures remain contained across most developed and developing regions, the report said.

Speaking at the launch, UN Assistant Secretary-General for Economic Development and Chief Economist Elliott Harris said the upward revision in the global economic forecast reflected in the report is positive news for the prospects of making tangible progress towards achieving the Sustainable Development Goals, but cautioned that "there is a strong need not to become complacent in response to upward trending headline figures".

"The report underscores that the risks have increased as well and highlights the need to urgently address a number of policy challenges, including threats to the multilateral trading system, high inequality and the renewed rise in carbon emissions," he added.

The macroeconomic outlook in South Asia remains favourable, amid robust domestic demand, strong infrastructure investment and moderately accommodative monetary policies. GDP growth in the region is expected to strengthen to 6.6% in 2018 and 6.8% in 2019, following an expansion of 6.0% in 2017.

Regional inflation is anticipated to remain stable and at relatively low levels. This positive outlook provides an enabling environment for most countries in the region to make further progress in addressing the vast development challenges across economic, social and environmental dimensions.

"Deeper reforms, such as strengthening fiscal accounts and tackling the region's large infrastructure gaps, are also needed to boost productivity gains and unleash the region's growth potential. Downside risks faced by the economies in South Asia include setbacks on the reform agenda, heightened regional geopolitical tensions, or a sharp rise in oil prices," it said.

GDP growth forecasts in 2018 have been upwardly revised in nearly 40 per cent of countries since the previous forecast presented in the WESP Report 2018 was released last December. However, some countries and regions are still not sharing in the global cyclical upturn, in many cases due to structural impediments to development.

The report also notes the trade tensions that have been building among many of the world's largest economies. Major trade agreements such as NAFTA have undergone prolonged renegotiation, and a range of tariff and trade barriers have been put forward by major economies.

In addition to these measures taken outside the auspices of the World Trade Organisation, a rising number of disputes have been raised within the WTO in recent months, including cases involving Australia, Canada, China, India, Pakistan, South Korea, Russia, Ukraine, the UAE, the US and Vietnam.

"A move towards a more fragmented international trade landscape could reverse recent improvement in the global economy," it said.

First Published:May 18, 2018 6:00 AM IST