International Monetary Fund (IMF) in its report ‘Global prospects and policy challenges’, meant for the G20 meeting of finance ministers in Ankara has stated that near-term growth prospects remain favourable in India but some macroeconomic imbalances still exist. The report highlighted that, while the faster-than-expected fall in inflation has created space for considering modest cuts in the nominal policy rate, medium-term inflationary pressures and upside risks to inflation remain.
The report said that in India, domestic demand is accelerating, underpinned by the large positive terms of trade shock (mostly due to collapsing commodity-import prices),' noting that the outlook for emerging economies has weakened in 2015 relative to last year. With balance sheet strains in the corporate and banking sectors, financial sector regulation in India should be enhanced, provisioning increased, and debt recovery strengthened.
IMF report has further stated that in India, the post-election recovery of confidence and lower oil prices offer an opportunity to pursue much-needed structural reforms. It added that in India, which is one of the world's largest commodity importers, growth will benefit from recent policy reforms, a consequent pickup in investment, and lower commodity prices.
The report talking about other countries has said that global growth in the first half of 2015 was lower than in the second half of 2014, reflecting a further slowdown in emerging economies and a weaker recovery in advanced economies. China, growth is expected to decline as excesses in real estate, credit, and investment continue to unwind, with a further moderation in investment growth, especially residential real estate.
