India’s economic growth rate to surpass China’s in 2016, says IMF

By: | Updated: January 20, 2015 3:43 PM

IMF terms Narendra Modi-led government's reforms as 'promising' but insists that their implementation is key.

Indian economy, Indian economic growthIndia is projected to grow at 6.3 per cent in 2015 and 6.5 per cent in 2016, when it is likely to cross China’s projected growth rate of 6.3 per cent. (Reuters)

India is expected to grow at 6.3 per cent this year and 6.5 per cent in 2016 by when it is likely to cross China’s projected growth rate, the IMF said today while terming the reforms of new government led by PM Narendra Modi as “promising” but insisted that their implementation is key.

In 2014, India’s growth rate was 5.8 per cent against China’s 7.4 per cent, said the World Economic Report update released by the International Monetary Fund. India’s growth rate in 2013 was five per cent as against China’s 7.8 per cent.

India is projected to grow at 6.3 per cent in 2015 and 6.5 per cent in 2016, when it is likely to cross China’s projected growth rate of 6.3 per cent, the IMF said.

“I think the reform plans of the new Prime Minister are promising. We are going to have to see the speed of the implementation,” said Gian Maria Milesi-Ferretti, Deputy Director in IMF’s Research Department.

Responding to a question, the IMF official said the effect of Prime Minister Narendra Modi-led government’s economic reform would be difficult to predict as these are structural reforms and are growing gradually over the medium term.

“Key is going to be implementation,” Milesi-Ferretti said.

graph-china

According to the latest IMF report, in India, the growth forecast is broadly unchanged, however, the weaker external demand is offset by the boost to the terms of trade from lower oil prices and a pickup in industrial and investment activity after policy reforms.

The report said global growth will receive a boost from lower oil prices, which reflect to an important extent higher supply.

But this boost is projected to be more than offset by negative factors, including investment weakness as adjustment to diminished expectations about medium-term growth continues in many advanced and emerging market economies.

Global growth in 2015–16 is projected at 3.5 and 3.7 per cent, a downward revision of 0.3 per cent relative to the October 2014 World Economic Outlook (WEO).

The revision reflect a reassessment of prospects in China, Russia, the euro area and Japan as well as weaker activity in some major oil exporters because of the sharp drop in oil prices.

The United States is the only major economy for which growth projections have been raised, the IMF said.

Investment growth in China declined in the third quarter of 2014, and leading indicators point to a further slowdown.

The authorities are now expected to put greater weight on reducing vulnerabilities from recent rapid credit and investment growth and hence the forecast assumes less of a policy response to the underlying moderation, the report said.

Slower growth in China will also have important regional effects, which partly explains the downward revisions to growth in much of emerging Asia, it said.

Among major advanced economies, growth in the United States rebounded ahead of expectations after the contraction in the first quarter of 2014, and unemployment declined further, while inflation pressure stayed more muted, also reflecting the dollar appreciation and the decline in oil prices.

Growth is projected to exceed three per cent in 2015-16, with domestic demand supported by lower oil prices, more moderate fiscal adjustment, and continued support from an accommodative monetary policy stance, despite the projected gradual rise in interest rates.
But the recent dollar appreciation is projected to reduce net exports, it said.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition