IMF retains FY16 India forecast at 7.3%, world may grow 3.4%

NEW DELHI: The Indian economy is expected to grow by 7.3% in the current financial year and 7.5% in 2016-17, the International Monetary Fund (IMF) said on Tuesday as it retained growth estimates for the country but reduced global forecast, citing uneven and weak growth across economies. China is forecast to grow 6.9% in 2015-16, 6.3% in 2016-17 and 6% in 2017-18. Indian authorities expect the economy to grow 7.1-7.5% in the current fiscal and then accelerate in the years ahead. The World Economic Outlook update now projects global growth at 3.4% this year and 3.6% in 2017, slightly lower than the forecast (3.6% for 2016 and 3.8% for 2017) issued in October 2015.
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World Bank projects India to grow at 7.5% in 2015-16 and 7.8% in 2016-17, while ADB pegs it at 7.4% & 7.8% respectively. The IMF reiterated that the Indian economy remained a bright spot against the backdrop of a gloomy global growth. “India and parts of emerging Asia are bright spots, projected to grow at a robust pace, whereas Latin America and the Caribbean will again see a contraction in 2016, reflecting the recession in Brazil and economic stress elsewhere in the region, even as most other countries in the region will continue to grow,” IMF said.
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“This coming year is going to be a year of great challenges and policy makers should be thinking about short-term resilience and the ways they can bolster it, but also about the longer-term growth prospects,” said Maurice Obstfeld, IMF economic counsellor and director of research. It said that looking beyond the short-run forecasts, there were important risks to the outlook, which are particularly prominent for emerging markets and developing economies and could stall global recovery.
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“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: “A sharper-than-expected slowdown in China, which could bring more international spillovers through trade, commodity prices, and waning confidence. A further appreciation of the dollar and tighter global financing conditions which could raise vulnerabilities in emerging markets, possibly creating adverse effects on corporate balance sheets and raising funding challenges for those with high dollar exposures and a sudden bout of global risk aversion, regardless of the trigger, could lead to sharp further depreciations and possible financial strains in vulnerable emerging market economies,” the IMF said.