International Monetary Fund (IMF) in its World Economic Outlook Update has said that India will be the world’s fastest growing economy for the second consecutive year in 2016 at 7.5 per cent. The global agency though lowered its current year global economy growth forecast to 3.3 per cent, but it retained India’s growth projection for 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.
For India, IMF follows data for fiscal year ending March, while for other countries it considers the December-ending periods. It has retained the projection made earlier in April for both India and China and said that in emerging market economies 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. Growth in emerging market and developing economies has been estimated at 4.2 per cent in 2015, down 0.1 per cent from the projection made April.
IMF has said that “Global growth is projected at 3.3 per cent in 2015, marginally lower than in 2014 and 0.2 percentage point below what it predicted in April, with a gradual pickup in advanced economies and a slowdown in emerging market and developing economies. In 2016, growth is expected to strengthen to 3.8 per cent.”
It said that rebound in activity in a number of distressed economies is expected to result in a pickup in growth in 2016. Though, it pinned much of the blame for the lower growth forecast on the United States and said it expected the US economy to grow 2.5 percent this year. Surprisingly, the IMF maintained its forecasts for a pickup in growth in the euro zone, despite Greece moving ever closer to the edge of default and an exit from the currency bloc.
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