The International Monetary (IMF) while cutting its global growth forecast has said that Indian economy is expected to grow faster than other major emerging economies, projecting a growth rate of 7.5 percent in 2016. It said that India's growth is expected to strengthen from 7.3 percent this year and last year to 7.5 percent next year. Growth will benefit from recent policy reforms, a consequent pickup in investment, and lower commodity prices. The IMF’s forecast for 2020 sees India occupying the top slot among major economies with a growth rate of 7.7%. Though, IMF has pegged its estimate at 7.3% this year, that's lower than the 7.5% forecast in the July 2015 World Economic Outlook (WEO) Update.
The IMF has also said that India's near-term growth prospects remain favourable. The narrowing of the current account deficit has lowered external vulnerabilities while the faster-than-expected decline in inflation has created space for interest-rate reductions. It expects inflation to decline further in 2015 because of the drop in global oil and agricultural commodity prices. The IMF called for continued fiscal consolidation but urged that it should be more growth friendly, tied to tax reform and lower subsidies.
On the other hand, the fund has cut its global growth forecasts for a second time this year, citing weak commodity prices and a slowdown in China and warned that policies aimed at increasing demand were needed. The downgrades come after central banks in major industrial economies have cut rates to near zero and spent around $7 trillion in quantitative easing programs in the seven years since the global financial crisis. IMF ahead of its annual meet in Peru has forecast that the world economy would grow at 3.1 percent this year and by 3.6 percent in 2016. Both new forecasts are 0.2 percentage point below its July forecast and are 0.4 percentage point and 0.2 percentage point below its April outlook, respectively.
Among major economies, the IMF has said that United States is expected to grow by 2.6 percent in 2015 and by 2.8 percent in 2016, the Eurozone is forecast to grow by 1.5 percent and 1.6 percent, respectively, with Japan seen at 0.6 percent and 1.0 percent. The Fund sees growth in China slowing to 6.8 percent this year and 6.3 percent in 2016. The biggest hit to growth will come in emerging economies where the IMF has cut its growth forecast to 4 percent in 2015, due to a sharp slide in commodity prices.
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