IMF retains growth forecast for India

NEW DELHI: The International Monetary Fund has retained its forecast for India’s growth even as it marginally lowered the global growth target for the year in its latest update of the world economy. Indian economy is forecast to grow 7.5% in 2015, the IMF said in its update of the World Economic Outlook, retaining its April forecast.

Despite the upheavals in financial markets, China escaped a cut and is pegged to grow 6.8% this year, significantly lower than India. Global economy is pegged to grow 3.3% in 2015, marginally lower than in 2014, and 0.2 percentage point below the earlier forecast.

“A setback to activity in the first quarter of 2015, mostly in North America, has resulted in a small downward revision to global growth for 2015 relative to the April 2015 World Economic Outlook (WEO),” the IMF said.

However, it said that drivers for acceleration in growth are intact in the developed world. It expects global growth to pick up in 2016 to 3.8%, with India retaining the pole position with a 7.5% growth. In the current year, though, it sees some significant downside risk for the Indian economy. “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,” the IMF said while flagging lower commodity prices as risks for lowincome developing economies.

Disruptive asset price shifts and a further increase in financial market volatility remain an important downside risk, the IMF said, and called for timely policy action to avert any contagion effect of Greece. The multilateral fund also took note of the developments in China, pointing to “greater difficulties in China’s transition to a new growth model, as illustrated by the recent financial market turbulence” as a risk to medium term growth.

It called for advanced economies to continue with the accommodative monetary policy to support economic activity and lift inflation back to target while urging others with fiscal space to utilise the room to push growth. “In a number of countries with fiscal space, the near-term fiscal stance should be eased, especially through increased infrastructure investment,” the IMF said.