MF retains India's economic growth target at 5.4 percent for 2015

MF retains India's economic growth target at 5.4 percent for 2015

Jul 25,2014   12:45 Hrs IST

Optimistic over the fundamentals of Indian economy, the International Monetary Fund (IMF) has retained its growth forecast at 5.4 percent in 2015 and a stronger 6.4 percent growth next year. Among the BRICS nations, India is the only emerging economy to escape a cut in growth forecast in the IMF’s update of its World Economic Outlook. The IMF stated that growth has bottomed out in India and activity is projected to pick up gradually after the post-election recovery in business sentiment, offsetting the effect of an unfavourable monsoon on agricultural growth. After growing at around 9 percent during FY07-FY11, Indian economic growth slowed down to 6.7 percent during FY12 and below 5 percent during FY13 and FY14. On global front, IMF has stated that weaker growth in the US, China and several important emerging markets forced the Fund to downgrade global economy growth forecast to 3.4 percent from 3.7 projected earlier. It added that global growth could be weaker for longer, given the lack of robust momentum in advanced economies despite very low interest rates and the easing of other brakes to the recovery. The IMF expects China to grow at 7.4 percent this year, 0.2 percentage point lower than its previous forecast. Russian economy is expected to grow by only 0.2 percent this year, down from its previous forecast of 1.3 percent as escalating sanctions against Russia for its actions in Ukraine sparked capital flight out of the country, exacerbating a fall in investment levels. The fund also cut growth expectations for Brazil and Mexico by more than half a percentage point for the year as weaker US growth and timid investment weigh on growth. Meanwhile, the IMF suggested that the governments in both advanced and emerging-market economies must take structural reforms to close infrastructure gaps, strengthen productivity and lift potential growth rate.