IMF retains FY17 India GDP forecast at 7.5 pc, cuts world growth

The International Monetary Fund (IMF) today kept India’s growth projection unchanged at 7.3 per cent in the current fiscal and 7.5 per cent in the next, even as it cut world economic outlook to 3.4 per cent for 2016.

In its update on World Economic Outlook (WEO), IMF said China’s growth would slow to 6.3 per cent in 2016 and further to 6 per cent in 2017, but India would continue to grow at a “robust pace”.

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

As for the world growth, IMF today forecast 3.4 per cent for 2016 and 3.6 per cent for 2017.

For India, it retained the growth forecast at 7.3 per cent for the current fiscal and 7.5 per cent for 2016-17 and 2017-18.

“Risks to the global outlook remain tilted to the downside and relate to ongoing adjustments in the global economy: a generalised slowdown in emerging market economies, China’s rebalancing, lower commodity prices, and the gradual exit from extraordinarily accommodative monetary conditions in the United States,” IMF added.

“If these key challenges are not successfully managed, global growth could be derailed,” it cautioned.

IMF said the pick-up in global activity is projected to be more gradual than in the October WEO, especially in emerging market and developing economies.

In the last WEO update released in October, IMF had projected India to grow at 7.3 per cent in the current fiscal and 7.5 per cent in 2016-17. As for world growth, it had put the figures at 3.6 per cent for 2016 and 3.8 per cent for 2017.

Emerging market and developing economies account for over 70 per cent of the global growth.

“The picture for emerging market and developing economies is diverse, but in many cases challenging. The slowdown and rebalancing of the Chinese economy, lower commodity prices and strains in some large emerging market economies will continue to weigh on growth prospects in 2016-17,” it said.

The three key transitions that would influence the global outlook, it said, include gradual slowdown and rebalancing of economic activity in China from investment and manufacturing to consumption and services.

Also, lower prices for energy and other commodities, and a gradual tightening in monetary policy in the United States in the context of a resilient US recovery are also expected to have a bearing on global outlook.

IMF said oil prices have declined markedly since September 2015 in anticipation of sustained increases in production by the Organisation of the Petroleum Exporting Countries (OPEC) in an already oversupplied market.

Futures markets indicate only modest increases in prices in 2016 and 2017. Prices of other commodities, especially metals, have fallen as well, it said.

“The pick-up in consumption in oil importers has so far been somewhat weaker than evidence from past episodes of oil price declines would have suggested, possibly reflecting continued deleveraging in some of these economies,” it added.

“Limited pass-through of price declines to consumers may also have been a factor in several emerging market and developing economies.”

IMF projected advanced economies’ growth to rise by 0.2 percentage point in 2016 to 2.1 per cent and hold steady in 2017.

Growth in emerging market and developing economies is projected to increase from 4 per cent in 2015 the lowest since the 2008-09 financial crisis to 4.3 per cent and 4.7 per cent in 2016 and 2017, respectively.