India set to grow faster with post-election recovery: IMF

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Arun Kumar | 08 Oct, 2014
With India's growth increasing on rising business confidence and stronger manufacturing activity since the April-May general election, it's expected to grow faster in the rest of 2014 and 2015, according to the International Monetary Fund (IMF).

India is "projected to grow at 5.6 percent in 2014 and pick up further to 6.4 percent in 2015 as both exports and investment increase", it said Tuesday in its latest report on global economic health.

Increased exports and investment would "more than offset the effect of an unfavourable monsoon on agricultural growth earlier in the year", the 188-nation watchdog said in its October World Economic Outlook (WEO).

"The post-election recovery of confidence in India also provides an opportunity" for India "to embark on its much-needed structural reforms", it said.

After "several years of slowing growth prospects", the WEO suggested, "It is time for major emerging market economies to turn to important structural reforms to raise growth more robustly".

For India, the suggested agenda included removing infrastructure bottlenecks in the power sector and implementing reforms to education, labour, and product markets to raise competitiveness and productivity.

"In emerging market economies, lower potential growth is the dominating factor," the WEO said, suggesting, "For these economies as a whole, potential growth is now forecast to be 1.5 percent lower than in 2011."

"Here again, differentiation is the rule. China is sustaining high growth, but slightly lower growth in the future is seen to be a healthy development," it said.

On the other hand, WEO noted, "India has recovered from its relative slump; thanks in part to effective policies and a renewal of confidence, growth is expected once again to exceed 5 percent."

With recent monetary tightening, disinflation should continue in India, it said.

But inflation overall will remain high at 7.8 percent in 2014, declining slightly to 7.5 percent in 2015, the WEO added.

With world growth in the first half of 2014 slower than expected, the latest WEO projected global growth for 2014 at 3.3 percent, 0.4 percentage point lower relative to the April 2014 report.

The growth projection for 2015 was also slightly lower at 3.8 percent.

These projections, it said, were predicated on the assumption that key drivers supporting the recovery in advanced economies - including moderating fiscal consolidation and highly accommodative monetary policy - remain in place.

Projections also assume a decline in geopolitical tensions, supporting some recovery in stressed economies, it said.