The International Monetary Fund (IMF) lowered growth forecast for India for the current fiscal and warned emerging economies face a longer growth slowdown and the euro zone a protracted recession.
The multilateral lender expects Indian economy to grow 5.6% in the current financial year, a tad below its April estimate of 5.8%. It expects the growth to rise to 6.3% in the next fiscal. The fund expects the world economy to grow slightly above 3% in 2013, same as in 2012 but 0.2% points below its April forecast, as it cautioned that while old risks remain, new threats have created downside risks to global growth.
It warned that unwinding of the US monetary stimulus could lead to sustained capital outflows, presenting more policy difficulties for slowing emerging economies. India has found it difficult to cut interest rates despite comfortable inflation because of the sharp depreciation of the rupee due to portfolio outflows.
In the last five weeks foreign institutional investors (FIIs) have pulled out nearly $8.5 billion from the Indian markets.
However, IMF offers a solution. “Macro prudential and structural reforms can help make this trade-off less stark,” it said.
IMF and India’s official GDP estimates are not comparable as the two follow different methodologies – IMF computes GDP at market prices while India adopts the factor cost method.
IMF wants monetary stimulus to continue, and cautions against haste in fiscal tightening In a strong signal to the US, the IMF asked ‘key developed economies’ to pursue policies that support growth.
It also cautioned against undue haste by developed world in correcting fiscal excesses. It called for a gradual near term fiscal adjustment to ensure that policy mix remains supportive of growth even as the debt laden countries try for medium-term public debt sustainability.
It suggested the two surplus economies China and Germany should adopt policies to support growth – China should boost consumption, and Germany investments.
The multilateral lender expects Indian economy to grow 5.6% in the current financial year, a tad below its April estimate of 5.8%. It expects the growth to rise to 6.3% in the next fiscal. The fund expects the world economy to grow slightly above 3% in 2013, same as in 2012 but 0.2% points below its April forecast, as it cautioned that while old risks remain, new threats have created downside risks to global growth.
It warned that unwinding of the US monetary stimulus could lead to sustained capital outflows, presenting more policy difficulties for slowing emerging economies. India has found it difficult to cut interest rates despite comfortable inflation because of the sharp depreciation of the rupee due to portfolio outflows.
In the last five weeks foreign institutional investors (FIIs) have pulled out nearly $8.5 billion from the Indian markets.
However, IMF offers a solution. “Macro prudential and structural reforms can help make this trade-off less stark,” it said.
IMF and India’s official GDP estimates are not comparable as the two follow different methodologies – IMF computes GDP at market prices while India adopts the factor cost method.
IMF wants monetary stimulus to continue, and cautions against haste in fiscal tightening In a strong signal to the US, the IMF asked ‘key developed economies’ to pursue policies that support growth.
It also cautioned against undue haste by developed world in correcting fiscal excesses. It called for a gradual near term fiscal adjustment to ensure that policy mix remains supportive of growth even as the debt laden countries try for medium-term public debt sustainability.
It suggested the two surplus economies China and Germany should adopt policies to support growth – China should boost consumption, and Germany investments.
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