After World Bank, IMF slashes India’s growth to 6.6% in FY17

Washington, January 16 

The IMF today cut India’s growth rate for the current fiscal year to 6.6% from its previous estimate of 7.6% due to the “temporary negative consumption shock” of demonetisation, days after the World Bank also decelerated India’s growth estimates.

“In India, the growth forecast for the current (2016-17) and next fiscal year were trimmed by one percentage point and 0.4 percentage point, respectively, primarily due to the temporary negative consumption shock induced by cash shortages and payment disruptions associated with the recent currency note withdrawal and exchange initiative,” the International Monetary Fund (IMF) said in its latest World Economic Outlook (WEO) update released today.

The IMF said after a lacklustre outturn in 2016, economic activity is projected to pick up pace in 2017 and 2018, especially in emerging market and developing economies.

The global growth for 2016 is now estimated at 3.1%, in line with the October 2016 forecast.

Economic activity in both advanced economies and emerging market and developing economies (EMDEs) is forecast to accelerate in 2017-18, with global growth projected to be 3.4% and 3.6%, respectively, again unchanged from the October forecasts, it said.

As per new IMF projections, India’s growth in 2016 is now estimated to be 6.6% as against 7.6% earlier forecast. In 2017, IMF has projected a growth rate of 7.2% as against its previous forecast of 7.6%.

The Indian economy is likely to revive to go back to its previously estimated growth rate of 7.7% in 2018, according to the WEO update.

The cut in India’s growth rates comes days after the World Bank decelerated India’s GDP growth for 2016-17 fiscal to 7% from its previous estimate of 7.6% citing the impact of demonetisation. But forecast issued on January 11 said India would regain momentum in the following years with a growth of 7.6% and 7.8% due to reform initiatives.

Despite IMF’s downward revision of India’s growth rate and a slight upward revision of China’s growth projections, India continues to be the fastest growing countries among emerging economies. But in 2016, China with 6.7% has edged past India (6.6) with 0.1 percentage point.

The growth forecast for 2017 was revised up for China (to 6.5%, 0.3% point above the October forecast) on expectations of continued policy support, the IMF said. India’s growth rate in 2017 as per the latest IMF projections is 7.2%.

In 2018, China’s growth rate is projected to be 6% against India’s 7.7%.  — PTI