Growth in India is expected to pick up further in 2017 and 2018. India will stay ahead of China on the growth curve in 2017 and 2018, while retaining the country’s gross domestic product forecast at 7.2 percent for the current fiscal the IMF has said.
Growth forecasts for 2017 were instead revised down in a India:
In India, the growth forecast for the current (2016–17) and next fiscal year were trimmed by one percentage point and 0.4 percentage point, respectively, primarily due to the temporary negative consumption shock induced by cash shortages and payment disruptions associated with the recent currency note withdrawal and exchange initiative.
With these caveats, aggregate growth estimates and projections for 2016–18 remain unchanged relative to the October 2016 World Economic Outlook. The outlook for advanced economies has improved for 2017–18, reflecting somewhat stronger activity in the second half of 2016 as well as a projected fiscal stimulus in the United States. Growth prospects have marginally worsened for emerging market and developing economies, where financial conditions have generally tightened. Near-term growth prospects were revised up for China, due to expected policy stimulus, but were revised down for a number of other large economies—most notably India, Brazil, and Mexico.
IMF Keeps India’s growth to pick up in 2017-2018
The revisions mirror primarily macroeconomic implications of changes in policy assumptions for the world’s two largest economies, the United States and China, the multilateral agency said.
According to the report, China’s forecast for 2017 was revised up by 10 basis points, signalling the stronger than expected outturn in the first quarter of the year underpinned by previous policy easing and supply-side reforms.
For 2018, the upward revision of 20 basis points mainly reflects an expectation that the authorities will delay fiscal adjustment to meet their target of doubling their 2010 real GDP figure by 2020.
The delay comes at the cost of further large increases in debt, but downside risks around this baseline have also increased, it said.
According to the IMF, China’s failure to continue focus on addressing financial sector risks and curb excessive credit growth could result in an abrupt growth slowdown, with adverse spillovers to other countries through trade, commodity price, and confidence channels.
A faster-than-expected monetary policy normalisation in the United States could tighten global financial conditions and trigger reversals in capital flows to emerging economies, along with US dollar appreciation, it predicted.