Exports, investment projects expected to drive growth

India’s growth is expected to improve in 2014, the International Monetary Fund said on Tuesday. “India’s growth is expected to recover from 4.4 per cent in 2013 to 5.4 per cent in 2014, supported by slightly stronger global growth, improving export competitiveness and implementation of recently approved investment projects,” the latest edition of the World Economic Outlook released by the IMF said.

“A pick-up in exports in recent months and measures to curb gold imports have 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 and a confidence boost from recent policy actions, but will remain below trend, it added.

“Consumer price inflation is expected to remain an important challenge, but should continue to move onto a downward trajectory,” the IMF report said.

The outlook also estimated that India’s growth rate would increase to 6.4 per cent in 2015. In 2012, India’s growth rate stood at 4.7 per cent.

“For India, real GDP growth is projected to strengthen to 5.4 per cent in 2014 and 6.4 per cent in 2015, assuming that Government efforts to revive investment growth succeed and export growth strengthens after the recent rupee depreciation,” the report said.

Steady in China

The forecast for China is that growth will remain broadly unchanged at about 7.5 per cent in 2014-15, only a modest decline from 2012-13.

This projection is predicated on the assumption that the authorities gradually rein in rapid credit growth and make progress in implementing their reform blueprint so as to put the economy on a more balanced and sustainable growth path, the report said.

In India, the report said 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. Policymakers in India must also concentrate on structural reforms to support investment, the IMF report said.

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(This article was published on April 8, 2014)
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