IMF retains FY17 India GDP growth forecast at 7.5%

IMF retains FY17 India GDP growth forecast at 7.5%
The Prime Minister Narendra Modi-led government may have faced flak at home for its economic policies, but global organisations are still sanguine about India’s growth outlook with International Monetary Fund retaining 2016-17 GDP forecast at 7.5 per cent.

Earlier this month, the World Bank too retained India’s GDP forecast at 7.5 per cent on the back of increase in capital expenditure. Asian Development Bank has, however, projected the growth rate at 7.4 per cent for 2016-17.

“India and the rest of emerging Asia are generally projected to continue growing at a robust pace, although with some countries facing strong headwinds from China’s economic rebalancing and global manufacturing weakness,” IMF said in its update of World Economic Outlook.

IMF, however, warned that there were important risks to the outlook, which are particularly prominent for emerging market and developing economies and could stall global recovery.

“These risks relate mostly to the ongoing adjustments of the global economy, namely China’s rebalancing, lower commodity prices, and the prospects for the progressive increase in interest rates in the United States,” the IMF said.

Waning confidence
It said a sharper-than-expected slowdown in China could bring more international spillovers through trade, commodity prices and waning confidence.

IMF kept China’s growth projection unchanged at 6.3 per cent in 2016. IMF, however, cautioned that policymakers in emerging market and developing economies needed to press on with structural reforms to alleviate infrastructure bottlenecks, facilitate a dynamic and innovation-friendly business environment, and bolster human capital. On softening of crude oil prices, IMF said that a sharp collapse of oil prices was more of a drag than stimulus for global economy.

IMF also pared global growth forecast citing subdues demand as one of the reasons. The downward revision in global growth was largely accounted for by Brazil, where a recession is proving to be deeper and more protracted than previously expected; the Middle East, where prospects have been hurt by lower oil prices; and the US, where the growth momentum is now expected to hold steady rather than accelerate, it said.

Brazil’s economy is now projected to contract by 3.5 per cent in 2016, against the October projection of one per cent contraction. The US economy is expected to grow 2.6 per cent in 2016, against an earlier projection of 2.8 per cent.
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