America
India set to grow at 7.5 percent in 2016: IMF
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By Arun Kumar Washington, Oct 6
Growing faster than other
major emerging market economies, India's growth is expected to
strengthen from 7.3 percent this year and last year to 7.5 percent next
year, according to the International Monetary Fund (IMF).
"Growth
will benefit from recent policy reforms, a consequent pickup in
investment, and lower commodity prices," the IMF said in latest World
Economic Outlook (WEO) released Tuesday ahead of the World Bank-IMF
annual meetings in Lima (Peru).
The WEO foresees lower global
growth compared to last year, with modest pickup in advanced economies
and a slowing in emerging markets, primarily reflecting weakness in some
large emerging economies and oil exporting countries.
Global
real GDP grew at 3.4 percent last year, and is forecast to grow at only
3.1 percent this year. Growth is expected to rebound to 3.6 percent next
year and increase beyond 2016.
One of the key factors in this is
the gradual increase in the global weight of fast-growing countries
such as China and India, which further increases their importance as
drivers of global growth, the WEO said.
In India, near-term
growth prospects remain favourable, and the decrease in the current
account deficit has lowered external vulnerabilities, it said.
Inflation is expected to decline further in 2015, reflecting the fall in global oil and agricultural commodity prices.
The
faster-than expected decline in inflation has created space for
considering modest cuts in the nominal policy rate, IMF said.
But
the real policy rate needs to remain tight for inflation to decline to
the inflation target in the medium term, given upside risks to
inflation, it said.
Continued fiscal consolidation is also
essential, but it should be more growth friendly, WEO said suggesting
tax reform and reduction in subsidies.
With balance sheet strains
in the corporate and banking sectors, financial sector regulation
should be enhanced, provisioning increased, and debt recovery
strengthened, it suggested.
Structural reforms should focus on relaxing long-standing supply constraints in the energy, mining, and power sectors, WEO said.
Priorities
include market-based pricing of natural resources to boost investment,
addressing delays in the implementation of infrastructure projects, and
improving policy frameworks in the power and mining sectors.
In
advanced economies, growth is expected to remain robust and above trend
through 2016 and contribute to narrowing the output gap.
The
growth recovery in the euro area is projected to be broad-based. Growth
prospects in emerging markets and developing economies vary across
countries and regions.
But the outlook in 2015 is generally
weakening, with growth for these economies as a group projected to
decline from 4.6 percent in 2014 to 4 percent in 2015.
The WEO
underscores that raising actual and potential output must remain the
policy priority. This will require a combination of demand support and
structural reforms, it said.
(Arun Kumar can be contacted at [email protected])