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IMF cuts India’s economic growth estimate for 2016-17 to 6.6%

17 Jan 2017 Evaluate

Days after World Bank slashed India's growth estimates, the International Monetary Fund (IMF), which so far had maintained that India is a bright spot against the gloomy global economic outlook, too has cut India’s economic growth estimate for 2016-17 to 6.6% from its earlier projection of 7.6%, due to the impact of the government's move of demonetization of high value currency notes in early November.

The IMF in its ‘World Economic Outlook update’ stated that India’s 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 temporary negative consumption shock induced by cash shortages and payment disruptions associated with the recent currency note withdrawal and exchange initiative. IMF expects the economy to recover and grow by 7.2% in 2017-18, still slower than the previous estimate of 7.6%. In 2018-19, it expects the Indian economy to grow by 7.7%.

The IMF revised upwards China's estimate based on expectations of a stimulus. Near-term growth prospects were revised up for China, due to expected policy stimulus, but were revised down for a number of other large economies. China is projected to grow by 6.5% in 2017 and 6% in 2018, slower than India's growth in both years.

Earlier, the World Bank had lowered the India's GDP growth estimate for this fiscal to 7 percent, from its earlier estimate of 7.6 percent made in June last year, saying that immediate withdrawal of a large volume of currency in circulation and subsequent replacement with new notes announced by the government in November contributed to slowing growth in 2016.

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