In its latest World Economic Outlook released on Tuesday, the International Monetary Fund says the global upswing that began in mid-2016 has become broader and stronger, led by faster growth in the Euro area, Japan, China and the US.
India's projected growth provide some offset to China's gradual slowdown, the International Monetary Fund said.
"Over the medium term, growth is expected to gradually rise with continued implementation of structural reforms that raise productivity and incentivise private investment", the WEO said.
While President Trump's tax cuts are expected to boost United States and global growth in the short term, the report warned that those effects will soon wear off as well.
The Asian Development Bank and the World Bank have projected the Indian economy to grow at 7.3% in 2018-19.
This is the strongest pace since the growth spike in 2010 which initially followed the 2008-2009 global financial crisis. However, over the medium term, global growth is projected to decline to about 3.7% due to a shift toward inward-looking policies that harm worldwide trade and a potential further buildup of financial vulnerabilities that could give way to rapid tightening of global financial conditions.
India's growth rate in 2016 was 7.1 percent as against China's 6.7 percent.
China with 6.9 percent growth jumped marginally ahead of India in 2017.
The multilateral lending institution said the balance sheet vulnerabilities in India pose a downside risk to its medium-term growth prospects, requiring policy action. "The main priorities for lifting constraints on job creation and ensuring that the demographic dividend is not wasted are to ease labor market rigidities, reduce infrastructure bottlenecks, and improve educational outcomes", it said.
Higher public investment is among the reasons for the forecast's revision, according to the report.
For India, the report cautioned that corporate debts and banking sector credit quality are a drag on investments. According to the report, the recapitalisation plan for major public-sector banks announced in 2017 will help replenish capital buffers and improve the banking sector's ability to support growth.