United Nations: The International Monetary Fund (IMF) on Tuesday acknowledged the economic reforms carried out under Prime Minister Narendra Modi and projected India to be the world`s fastest growing major economy this year and next.


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The World Economic Outlook (WEO) released ahead of the IMF annual meeting in Bali said, "In India, important reforms have been implemented in recent years, including the Goods and Services Tax, the inflation-targeting framework, the Insolvency and Bankruptcy Code, and steps to liberalize foreign investment and make it easier to do business."


But citing external factors -- "the recent increase in oil prices and the tightening of global financial conditions" -- it cut India`s growth projection made in July for next year by 0.1 per cent to 7.4 per cent, which would still be the world`s fastest growth rate for major economies.


It kept the 7.3 per cent growth projection for this year made in July.


Compared to the projections made in April, the current one for 2018 is lower by 0.1 per cent and for 2019 by 0.4 per cent.


Up from India`s growth rate of 6.7 per cent in 2016, the growth projections for this year and the next reflect "a rebound from transitory shocks" of demonetisation and the implementation of the national Goods and Services Tax" and "strengthening investment and robust private consumption," WEO said.


Beyond 2019, the IMF sees India`s growth rate improving "owing to structural reforms and a still-favourable demographic dividend."


"India`s medium-term growth prospects remain strong at 7.75 per cent, benefiting from ongoing structural reform," it added.


For China, the next fastest-growing major economy, the IMF said it was lowering the growth projections for next year made in April by 0.2 per cent to 6.2 per cent "given the latest round of US tariffs on Chinese imports."


This year`s growth for China stays at 6.6 per cent.


Overall for the global economy, the IMF cut the growth projections made in July for this year and the next by 0.2 per cent to 3.7 per cent, as IMF Chief Economist Maurice Obstfeld warned that "there are clouds on the horizon" and "the likelihood of further negative shocks to our growth forecast has risen."


"In several key economies, moreover, growth is being supported by policies that seem unsustainable over the long term," he said.


He cited the uncertainties in trade as a result of US President Donald Trump`s policies and the tightening of financial markets in developing countries among factors increasing the risks to global growth,


This was the final WEO released under Obstfelt`s watch as he is leaving the IMF at the end of this year and will be succeeded by Gita Gopinath, the Kerala government`s economic adviser.


For India the IMF recommended "reform priorities include reviving bank credit and enhancing the efficiency of credit provision by accelerating the cleanup of bank and corporate balance sheets and improving the governance of public sector banks".


It added, "A high interest burden and risks from rising yields also 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."