The International Monetary Fund has lowered India’s GDP growth forecast for 2013 to 5.9% from 6% earlier and kept it unchanged for 2014 at 6.4%. It estimated growth in the 2012 calendar year at 4.5%, down from the previous projection of 5.4%. In an update to its “World Economic Outlook” (WEO) released on Wednesday, IMF projected global growth to pick up during 2013, as factors underlying soft global activity are expected to subside.
The IMF follows a calendar year while India reports its growth rate for the fiscal year ending March. Global growth is projected to average 3.5% in 2013, a moderate uptick from 3.2% in 2012, but 0.1 percentage point lower than that projected in the October 2012 WEO.
A further strengthening to 4.1% is projected for 2014, assuming recovery takes a firm hold in the euro area economy.
Growth in emerging markets and developing economies has been pegged at 5.5% in 2013. IMF said acute financial crisis risks are now somewhat lower, but renewed setbacks in the euro area and the risk of excessive near-term fiscal consolidation in the US could derail global growth. “If crisis risks do not materialise and financial conditions continue to improve, global growth could be stronger than projected,” the update said. Growth in the US is forecast to average 2% in 2013, rising above trend in the second half of the year. The near-term outlook for the euro area has been revised downwards, even though a strengthened EU-wide policy response to the crisis has reduced tail risks. It has also improved the financial condition of other euro zone countries.
“Policy actions have lowered acute crisis risks in the euro area and the United States. But, in the euro area, the return to recovery after a protracted contraction is delayed. While Japan has slid into recession, stimulus is expected to boost growth in the near term,” the update said.
IMF said most advanced economies need steady and sustained fiscal consolidation, as well as continuation of financial sector reforms to reduce risks in the financial system. It said China needs to pursue market-oriented structural reforms and rebalance its economy more towards private consumption, in order to ensure sustained rapid growth.