India to retain world’s fastest growing economy tag faster than China: IMF

Washington:  The International Monetary Fund (IMF) expects India to retain its recently acquired status as the world’s fastest growing major economy even as it pared the country’s growth forecast for the current fiscal. Growth in India is expected to rise above the rates in other major emerging market economies,” the IMF said in its latest World Economic Outlook Update released here.

“India’s growth is expected to strengthen from 7.3 percent this year and last year to 7.5 percent next year. Growth will benefit from recent policy reforms, a consequent pickup in investment, and lower commodity prices,” it said. On the other hand, growth in China is expected to decline to 6.8 percent this year and 6.3 percent in 2016.

Global growth for 2015 is projected at 3.1 percent, 0.3 percentage point lower than in 2014, and 0.2 percentage point below the forecasts in the July 2015 World Economic Outlook (WEO) Update. In advanced economies, growth is expected to remain robust and above trend through 2016 and contribute to narrowing the output gap.

The growth recovery in the euro area is projected to be broad based. In Latin America and the Caribbean, activity is expected to rebound in 2016 after a recession in 2015, it said. According to the report, in India, inflation is expected to decline further in 2015, reflecting the fall in global oil and agricultural commodity prices.

The faster-than expected decline in inflation has created space for considering modest cuts in the nominal policy rate, but the real policy rate needs to remain tight for inflation to decline to the inflation target in the medium term, given upside risks to inflation, it said.

“With balance sheet strains in the corporate and banking sectors, financial sector regulation should be enhanced, provisioning increased, and debt recovery strengthened,” it added. Structural reforms should focus on relaxing long-standing supply constraints in the energy, mining, and power sectors.

Priorities include market based pricing of natural resources to boost investment, addressing delays in the implementation of infrastructure projects, and improving policy frameworks in the power and mining sectors, IMF said.

Bureau Report