The US Federal Reserve’s intention to increase policy rates in 2017 may lead to lower capital inflows and higher outflows from the emerging economies, Finance Minister Arun Jaitley said.
The world economy faces considerable uncertainty in the aftermath of major economic and political developments during the last year, Jaitley said in his Budget speech.
The Minister said uncertainty around commodity prices, especially that of crude oil, has implications for the fiscal situation of emerging economies.
The Economic Survey, presented in Parliament yesterday had also highlighted that a spike in global oil prices may have dampening impact on the growth.
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“Nevertheless, the International Monetary Fund (IMF) estimates that world GDP will grow by 3.1 per cent in 2016 and 3.4 per cent in 2017. The advanced economies are expected to increase their growth from 1.6 per cent to 1.9 per cent and the emerging economies from 4.1 per cent to 4.5 per cent,” Jaitley said.
Noting that growth in a number of emerging economies is expected to recover in 2017, after relatively poor performance in 2016, the Minister said that these are positive signs and point to an optimistic outlook for the next year.
Amidst all these developments, Jaitley pointed out India stands out as a bright spot in the world economic landscape. “India’s macro-economic stability continues to be the foundation of economic success,” he said.
Observing that the Government has continued on the steady path of fiscal consolidation, without compromising on the public investment requirements of the economy, he said, “Externally, the economy successfully weathered a number of shocks, the redemption of FCNR deposits, volatility from the US elections and the Fed rate hike.”
According to IMF forecast, India is expected to be one of the fastest growing major economies in 2017.