IMF lowers India GDP forecast on global woes, infra bottlenecks

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SummaryThe International Monetary Fund on Tuesday sharply lowered India’s growth forecast for 2013-14 and 2014-15 as the global economy continued to remain ‘‘weak’’ while infrastructure and regulatory bottlenecks slowed the country’s output despite strong domestic demand.

The International Monetary Fund on Tuesday sharply lowered India’s growth forecast for 2013-14 and 2014-15 as the global economy continued to remain ‘‘weak’’ while infrastructure and regulatory bottlenecks slowed the country’s output despite strong domestic demand.

India’s GDP growth in dollar terms is estimated at 3.8% in 2013, lower by 1.8 percentage points from the July projections. While growth is expected to pick up to 5.1% in 2014, but will still be much lower than 6.3% recorded in 2011, IMF said in its World Economic Outlook report.

‘‘India’s potential (growth) has been undermined by supply bottlenecks arising from problems in the regulatory framework for mining, energy, telecommunications and other sectors; a consequent slowdown in permits and project approvals; and overstretched corporate balance sheets,’’ the Fund said. The infrastructure and regulatory bottlenecks slowed output in the face of still-strong domestic demand, it added.

Global GDP growth is estimated to lower by 0.3 percentage point to 2.9% in calender 2013 and by 0.2 percentage point to 3.6% for 2014, as advanced economies have recently ‘‘gained some speed’’ while the emerging market economies have slowed. While the growth forecast for advanced economies remain unchanged at 1.2% in 2013 and 2% in 2014, the EMEs are expected to grow 4.5% and 5.1% respectively powered by China’s 7% plus expansion.

Though growth has slowed in EMEs like India, IMF said monetary policy responses will need to consider inflationary pressures and policy credibility. ‘‘In a number of economies, including Brazil, India, and Indonesia, more tightening may well be needed to address continued inflation pressure from capacity constraints, which will likely be reinforced by recent currency depreciation,’’ it said. IMF forecast consumer price inflation in EMEs to remain elevated at 6.2% in 2013 and 5.7% in 2014 even though oil prices are set to remain subdued.

Finmin expects recovery in second quarter

Following three quarters of sub 5% growth, the GDP growth is expected to pick up from the second quarter of 2013-14, resulting in full year growth of around 5.5%, according to a finance ministry report released on Tuesday.

This is lesser than what the Economic Survey had anticipated, which was growth in the range of 6.1 to 6.7% for the fiscal.

The quarterly review 2013-14 (April-June) said the economy registered a growth rate of 4.4% in the first quarter (Q1) of 2013-14 as against 5.4% in the first quarter of 2012-13.

This is also the lowest growth rate since Q4 of

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