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Finance & Economy, Uncategorized

India to beat China again as fastest-growing economy in 2016 says IMF


Economic Growth

Economic Growth

India will be the world’s fastest growing economy for the second consecutive year in 2016 at 7.5 per cent, IMF today said, even as it lowered its current year global economy growth forecast to 3.3 per cent.

In its World Economic Outlook Update released here, IMF retained India’s growth projection for current year at 7.5 per cent which will be higher than China’s 6.8 per cent. It forecast a growth rate of 7.5 per cent for India in 2016 as well, as against China’s 6.3 per cent.

China was the fastest growing economy in 2014 at 7.4 per cent as against India’s 7.3 per cent, as per the IMF data.

IMF’s growth projection for India, however, is lower than the estimates of the Indian Finance Ministry and the Reserve Bank of India. The Finance Ministry expects GDP growth to be 8-8.5 per cent in 2015-16, while the Reserve Bank of India has estimated it at 7.6 per cent.

For India, IMF follows data for fiscal year ending March while for other countries it considers the December-ending periods.

In case of both India and China, IMF has retained the projection made earlier in April, while it has lowered global growth forecast from 3.5 per cent to 3.3 per cent for 2015.

The global growth projection for 2016 has been retained at 3.8 per cent.

“Global growth is projected at 3.3 per cent in 2015, marginally lower than in 2014, with a gradual pickup in advanced economies and a slowdown in emerging market and developing economies. In 2016, growth is expected to strengthen to 3.8 per cent,” the report said.

“Global growth is projected at 3.3 per cent in 2015, marginally lower than in 2014, with a gradual pickup in advanced economies and a slowdown in emerging market and developing economies. In 2016, growth is expected to strengthen to 3.8 per cent,” the report said.

In emerging market economies, it said the continued growth slowdown reflects several factors, including lower commodity prices and tighter external financial conditions, structural bottlenecks, rebalancing in China, and economic distress related to geopolitical factors.

A rebound in activity in a number of distressed economies is expected to result in a pickup in growth in 2016.

Growth in emerging market and developing economies has been estimated at 4.2 per cent in 2015, down 0.1 per cent from the projection made April.

At a news conference here, Olivier Blanchard, Director, Research Department, IMF, said the main unexpected development was the announcement of a negative growth rate for the first quarter in the United States.

“By itself, it can account for more than half of the revision of 0. 2 per cent to the world economy forecast for 2015. The question, when the numbers came out, was whether this was an indication of underlying weakness of the US economy.

“Now that the fog has largely cleared, the response is that it was not. Fundamentals are still solid, and the US recovery is on track,” he said.

Leaving forecast for China unchanged at 6.8 per cent for 2015, he said there is perhaps more uncertainty than before.

“The puncture of what had clearly become a stock market bubble may have some limited effect on spending. But, for the moment, the slowdown in growth is primarily led by a slowdown in real estate investment, a development we see as basically desirable,” Blanchard said.

“In constructing forecasts for China, our assumption continues to be that the Chinese authorities will indeed allow a moderate slowdown of growth, while also using monetary and fiscal policies if needed to prevent too sharp a slowdown.”

For 2017, IMF forecast a growth rate of 6.0 per cent, the official said.

Brazil‘s growth, he said, has been revised down, and is now forecast to be -1.5 per cent.

“Low confidence, together with tighter policies aimed at reestablishing confidence, are combining to yield a recession in the short run. Russia’s growth is forecast to be -3.4 per cent, a bit better than forecast in April, on the back of some improvement in commodity prices and confidence, but still clearly very bad,” he said.

In emerging market economies, the continued growth slowdown reflects several factors, including lower commodity prices and tighter external financial conditions, structural bottlenecks, rebalancing in China, and economic distress related to geopolitical factors, the report said.

“A rebound in activity in a number of distressed economies is expected to result in a pickup in growth in 2016,” the IMF said.

The distribution of risks to global economic activity is still tilted to the downside, it added.

Near-term risks include increased financial market volatility and disruptive asset price shifts, while lower potential output growth remains an important medium-term risk in both advanced and emerging market economies.

Lower commodity prices also pose risks to the outlook in low-income developing economies after many years of strong growth, the WEO report said.

Source: Economic Times – India to beat China again as fastest-growing economy in 2016: IMF

 

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