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India will be the world’s fastest growing economy for the second consecutive year in 2016 at 7.5 per cent, the IMF said on Thursday, even as it lowered its 2015 global economy growth forecast to 3.3 per cent.
In its World Economic Outlook Update released here, the IMF retained India’s growth projection for the current year at 7.5 per cent which will be higher than China’s 6.8 per cent. It forecast a growth rate of 7.5 per cent for India in 2016 as well, as against China’s 6.3 per cent. China was the fastest growing economy in 2014 at 7.4 per cent as against India’s 7.3 per cent, as per the IMF data.
The IMF’s growth projection for India, however, is lower than the estimates of the Finance Ministry and the Reserve Bank of India. The Finance Ministry expects GDP growth to be 8-8.5 per cent in 2015-16, while the RBI has estimated it at 7.6 per cent.
Global forecast
For both India and China, the IMF retained the projection made earlier in April, while it lowered global growth forecast from 3.5 per cent to 3.3 per cent for 2015. The global growth projection for 2016 has been retained at 3.8 per cent.
“Global growth is projected at 3.3 per cent in 2015, marginally lower than in 2014, with a gradual pick up in advanced economies and a slowdown in emerging market and developing economies. In 2016, growth is expected to strengthen to 3.8 per cent,” the report said. In emerging market economies, it said the continued growth slowdown reflects several factors, including lower commodity prices and tighter external financial conditions, structural bottlenecks, rebalancing in China, and economic distress related to geopolitical factors.
A rebound in activity in a number of distressed economies is expected to result in a pick up in growth in 2016. Growth in emerging markets and developing economies has been estimated at 4.2 per cent in 2015. At a news conference here, Olivier Blanchard, Director, Research Department, IMF, said the main unexpected development was the announcement of a negative growth rate for the first quarter in the US.
“By itself, it can account for more than half of the revision of 0. 2 per cent to the world economy forecast for 2015. The question, when the numbers came out, was whether this was an indication of underlying weakness of the US economy. “Now that the fog has largely cleared, the response is that it was not. Fundamentals are still solid, and the US recovery is on track,” he said.
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