IMF retains India GDP forecast at 7.5% for FY17, cuts world economic outlook for 2016

The International Monetary Fund (IMF) on Tuesday kept India's growth projection unchanged at 7.3% in the current fiscal and 7.5% in the next, even as it cut world economic outlook to 3.4% for 2016.

In its update on World Economic Outlook (WEO), IMF said China's growth would slow to 6.3% in 2016 and further to 6% in 2017, but India would continue to grow at a "robust pace".

"India and the rest of emerging Asia are generally projected to continue growing at a robust pace, with some countries facing strong headwinds from China's economic rebalancing and global manufacturing weakness," IMF said.

As for the world growth, IMF on Tuesday forecast 3.4% for 2016 and 3.6% for 2017. For India, it retained the growth forecast at 7.3% for the current fiscal and 7.5% for 2016-17 and 2017-18.

"Risks to the global outlook remain tilted to the downside and relate to ongoing adjustments in the global economy: a generalised slowdown in emerging market economies, China's rebalancing, lower commodity prices, and the gradual exit from extraordinarily accommodative monetary conditions in the United States," IMF added.

"If these key challenges are not successfully managed, global growth could be derailed," it cautioned.

IMF said the pick-up in global activity is projected to be more gradual than in the October WEO, especially in emerging market and developing economies. In the last WEO update released in October, IMF had projected India to grow at 7.3% in the current fiscal and 7.5% in 2016-17. As for world growth, it had put the figures at 3.6% for 2016 and 3.8% for 2017.

Emerging market and developing economies account for over 70% of the global growth. 

IMF said in advanced economies, a modest and uneven recovery is expected to continue, with a gradual further narrowing of output gaps.

"The picture for emerging market and developing economies is diverse, but in many cases challenging. The slowdown and rebalancing of the Chinese economy, lower commodity prices and strains in some large emerging market economies will continue to weigh on growth prospects in 2016 17," it said.

The three key transitions that would influence the global outlook, it said, include gradual slowdown and rebalancing of economic activity in China from investment and manufacturing to consumption and services.

Also, lower prices for energy and other commodities, and a gradual tightening in monetary policy in the United States in the context of a resilient US recovery are also expected to have a bearing on global outlook.

IMF said oil prices have declined markedly since September 2015 in anticipation of sustained increases in production by the Organisation of the Petroleum Exporting Countries (OPEC) in an already oversupplied market.

Futures markets indicate only modest increases in prices in 2016 and 2017. Prices of other commodities, especially metals, have fallen as well, it said.

"The pick-up in consumption in oil importers has so far been somewhat weaker than evidence from past episodes of oil price declines would have suggested, possibly reflecting continued deleveraging in some of these economies," it added.

"Limited pass-through of price declines to consumers may also have been a factor in several emerging market and developing economies." IMF projected advanced economies' growth to rise by 0.2 percentage point in 2016 to 2.1% and hold steady in 2017.

Growth in emerging market and developing economies is projected to increase from 4% in 2015 the lowest since the 2008 09 financial crisis to 4.3% and 4.7% in 2016 and 2017, respectively.