The International Monetary Fund (IMF), which in its January review predicted India pipping China to be the fastest-growing major economy in 2016-17...
The International Monetary Fund (IMF), which in its January review predicted India pipping China to be the fastest-growing major economy in 2016-17, improved its outlook of the country’s economy. The IMF said the growth would strengthen to 7.2% in FY15 and further to 7.5% in FY16, based on the Central Statistics Office’s revised GDP estimates. India’s GDP, the IMF had said in January, would expand 6.3% in 2015-16 and 6.5% in 2016-17
An IMF release issued on Wednesday, in the backdrop of the IMF’s latest annual customary Article IV talks with New Delhi, said the economy was “reviving”, but said that for the trend to continue, the country should revitalise the investment cycle and accelerate structural reforms.
The post-talks staff report was prepared prior to the release of new CSO numbers, which said as per the new series with 2011-12 as the base, real GDP growth (at market prices) would accelerate to 7.4% in 2014-15, making India the fastest-growing large economy in the world.
The government’s estimate of the GDP growth (at market prices) for FY15 is 7.4% and between 8-8.5% for FY16, after it changed the methodology, captured efficiency better and shifted the base year to 2011-12.
“(IMF) staff views the medium-term 4% inflation target set out by the Urjit Patel committee report as broadly appropriate… Staff supports further efforts to enhance the monetary framework along the lines set out in the Patel committee report, including increasing the operational autonomy of the RBI, institutionalisation and setting the target zone for headline CPI inflation and establishment of a monetary policy committee and accountability framework,” stated IMF.
While public and private investment looked stronger, the investment activity continued to be held back by structural and supply-side constraints, said Paul Cashin, IMF mission chief for India. He added that bolstering the financial sector and further financial inclusion would support growth, but cautioned that spillovers from weak global growth, global financial market volatility were among the external risk factors, while weak corporate balance sheets and worsening bank asset quality were negatives on the domestic front.
Referring to the CSO’s new GDP numbers, Cashin said: The revised growth figures support our view that economic recovery in India is under way, albeit pointing to a somewhat faster pace than we, and others, previously believed.”