The International Monetary Fund (IMF) has projected India’s economy to grow by 5.4% in 2014-15 and 6.4% in 2015-16 on the back of strengthening global growth, improving export competitiveness and implementation of recently approved investment projects.
In its latest World Economic Outlook (WEO), the IMF said overall growth is expected to firm up on policies supporting investment and a confidence boost from recent policy actions, but will remain below trend. IMF projections are based on market prices whereas estimation by the country’s statistics office is on the basis of 2004-05 prices.
But the latest forecast from the IMF should bring some cheer to the policymakers battling to restore faltering growth in Asia’s third-largest economy. Growth has slowed sharply and has become a point of debate in the ongoing national polls. It said consumer price inflation is expected to remain an important challenge but should continue to move onto a downward trajectory. Retail inflation has moderated in recent months on the back of slowing food inflation but has remained above the Reserve Bank of India’s comfort level.
IMF said the global recovery is becoming broader, but the changing external environment poses new challenges to emerging market and developing economies. The multilateral agency forecasts global growth to average 3.6% in 2014 — up from 3% in 2013 — and to rise to 3.9% in 2015.
“The recovery which was starting to take hold in October is becoming not only stronger, but also broader,” said IMF chief economist Olivier Blanchard. “Although we are far short of a full recovery, the normalization of monetary policy — both conventional and unconventional — is now on the agenda.” Blanchard cautioned, however, that while acute risks have decreased, risks have not disappeared.
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