IMF Slashes India’s Growth Forecast by 0.4% to 7.2% for 2017

NEW DELHI: The International Monetary Fund (IMF) slashed India’s annual growth forecast by 0.4 percentage points to 7.2 per cent for 2017. For China the report has forecasted growth rate at 6.6 per cent in 2017, slowing to 6.2 per cent in 2018.

IMF had forecast a growth of 7.6 for Indian economy in its earlier reports issued before demonetisation. In its report on India, issued in Washington, IMF has cited the impact of demonetization for the lower growth forecast of Indian economy.

IMF in a statement said, “In India, the growth forecast for 2017 has been trimmed by 0.4 percentage point to 7.2 per cent, primarily because of the temporary negative consumption shock induced by cash shortages and payment disruptions from the recent currency exchange initiative.

IMF in its latest annual World Economic Outlook (WEO) said, “Medium-term growth prospects are favourable, with growth forecast to rise to about eight per cent over the medium term due to the implementation of key reforms, loosening of supply-side bottlenecks, and appropriate fiscal and monetary policies.” According to the IMF report, India’s economy has grown at a strong pace in recent years owing to the implementation of critical structural reforms, favourable terms of trade, and lower external vulnerabilities.

According to IMF report, Beyond the immediate challenge of replacing currency in circulation following the November 2016 currency exchange initiative, policy actions should focus on reducing labour and product market rigidities to ease firm entry and exit, expand the manufacturing base, and gainfully employ the abundant pool of labour. The Fund has forecast world growth of 3.1 per cent in 2016 to 3.5 per cent in 2017 and 3.6 per cent in 2018.