IMF revises growth forecast, India to grow at 7.7% in 2017-18

The Dollar Business Bureau 

The International Monetary Fund (IMF) said on Tuesday that the economic growth of India is likely to rebound to 7.2% in the current fiscal of 2017-18 and 7.7% in the next fiscal of 2018-19 after the disruptions caused due to demonetisation, whereas it recommends the elimination of long-standing structural bottlenecks to increase market efficiency.

The disruptions (majorly to consumption in private sector) caused due to shortage of cash post demonetisation, accompanying the initiative on currency exchange are likely to slowly dissipate this year as shortage of cash would ease, the IMF said in its report on regional economic outlook.

Such type of disruptions would also be dissipated on account of a good monsoon season and sustained progress in resolving the bottlenecks on the supply side, it said.

“In India, the growth is estimated to rebound to 7.2% in financial year 2017-18 and to 7.7% in 2018-19,” the IMF said.

“Headwinds from weaknesses in India’s bank and corporate balance sheets will also weigh on near-term credit growth. Confidence and policy credibility gains, including from continued fiscal consolidation and anti-inflationary monetary policy, continue to underpin macroeconomic stability,” the IMF said.

The growth in Asia is estimated to further to 5.5% in the current year from 5.3% in 2016, the report said.

The growth is revised upward in China and Japan for 2017 as compared to the last October World Economic Outlook report, mainly due to constant policy support and strong latest data.

However, India’s growth is revised downward owing to temporary impact of the currency exchange initiative and the growth in South Korea is also estimated downward due to political uncertainty.

In the medium-term, slow growth in China is likely to be partly offset by improved growth in India, supported by major structural reforms.

Increasing productivity in agriculture, the most labour-intensive sector which employs around half of the country’s workers, would remain a major challenge in India, the report said.