The International Monetary Fund (IMF) has maintained its previous estimate of 5.4 per cent growth for Indian economy for 2014-15, which it projects to accelerate to 6.4 per cent in 2015-16, as per its latest World Economic Outlook report. It had previously upped the growth estimates for FY14 and FY15 in its report in January this year.
IMF pegged growth of 4.4 per cent for the year ended March 31, 2014 in one of the lowest levels in many years after growth fell from 4.7 per cent in 2012-13.
India’s growth is expected to accelerate due to slightly stronger global growth, improving export competitiveness and implementation of recently approved investment projects, according to IMF.
It said a pickup in exports in recent months and measures to curb gold imports have contributed to lower the current account deficit and policy measures to bolster capital flows have helped reduce external vulnerabilities.
“Overall growth is expected to firm up on policies supporting investment and a confidence boost from recent policy actions, but will remain below trend. Consumer price inflation is expected to remain an important challenge, but should continue to move onto a downward trajectory,” it added.
India’s consumer inflation declined to a 25-month low of 8.1 per cent in February, which led the Reserve Bank of India to keep the interest rates unchanged in its April 1 monetary policy review.
While blaming domestic factors for slower growth, IMF said “External factors have generally been much less important compared with internal factors for some relatively large or closed economies, such as China, India, and Indonesia.”
In the report, IMF recommended for India a continued fiscal consolidation to lower macroeconomic imbalances and also urged more economy reforms to boost the growth further that include market-based pricing of natural resources to boost investment, addressing delays in the implementation of infrastructure projects, improving policy frameworks in the power and mining sectors, reforming the extensive network of subsidies, and securing passage of the new goods and services tax to support medium-term fiscal consolidation.
For the global economy, IMF has cut GDP growth forecast by 0.1 percentage point each to 3.6 per cent for 2014 and 3.9 per cent for 2015, from its January estimate. While China’s growth will remain broadly unchanged at about 7.5 per cent this year, the US is expected to grow 2.8 per cent and UK at 2.9 per cent.
IMF said that global economic recovery has strengthened but remains uneven. “Acute risks have decreased, but risks have not disappeared,” it cautioned.
(Edited by Joby Puthuparampil Johnson)