The International Monetary Fund, or IMF, released its revised growth projections in its latest edition of the World Economic Outlook. While the IMF sees headwinds in emerging markets, the report is fairly bullish on India. GDP growth has been projected at 5.4% for India in 2014 and at 6.4% in 2015. This was based on the assumption that government efforts to revive investment growth succeed and export growth strengthens.
The report also mentioned a pick-up in exports in recent months and measures to curb gold imports that contributed to lowering the current account deficit. “Policy measures to bolster capital flows have further helped reduce external vulnerabilities.” the IMF said.
Overall growth is expected to firm up on policies supporting investment, slightly stronger global growth, improving export competitiveness, and a confidence boost from recent policy actions, but will remain below trend, it concluded. It advised policymakers in India to concentrate on structural reforms to support investment.
Consumer price inflation was cited as a challenge, but the IMF believed it should continue to move onto a downward trajectory. However, it did state that further tightening of the monetary stance might be needed for a durable reduction in inflation. “Continued fiscal consolidation will be essential to lower macroeconomic imbalances,” it said.
Last week, the Asian Development Bank, or ADB, stated that it expected India’s GDP to grow 5.5% in 2014-15 on the back of improved performance in industry and services and will inch up to 6% in 2015-16 as external demand improves due to the strength in advanced economies. While the forecast is in line with IMF’s projection, it is marginally lower than its previous estimate of 5.7% growth.
