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Overtaking China, India set to grow 7.5 pc in 2016: IMF
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Arun Kumar | 10 Oct, 2015
Overtaking China, India is expected to grow at 7.3 percent in 2015,
rising to 7.5 percent in 2016, the International Monetary Fund forecast
Friday lowering its April projections by 0.2 percentage points for 2015.
At
this rate, India will grow faster than China where the economy is
expected to slow down from 7.3 percent to 6.8 percent in 2015 and 6.3
percent in 2016, the IMF said in its October Update of 2015 Asia and
Pacific Regional Economic Outlook.
The latest report on the
region's economic health was released during the ongoing annual World
Bank-IMF meetings in Peruvian capital Lima.
"In India, the growth
recovery has continued, supported by a pickup in domestic demand, on
the back of strengthening industrial production and fixed investment,"
it said.
Lower global oil prices have also boosted economic
activity in India and underpinned a further improvement in the current
account and fiscal position and a sharp decline in inflation, the WEO
said.
Forward-looking indicators such as the manufacturing and
services Purchasing Managers' Indices (PMIs) as well indicate improving
activity, IMF said.
However, export growth dropped sharply in the first half of 2015, partly reflecting subdued global demand.
With
the revival of consumer and business sentiment, the incipient recovery
of investment is expected to contribute more to growth going forward,
the WEO said.
"In addition, higher public infrastructure
investment and government initiatives to unclog raw material linkages
and support the lending capacity of Indian banks should help crowd-in
private investment," it said.
Although lower oil prices are
supportive of domestic demand, weakened exports as well as headwinds
from weaknesses in India's corporate and bank balance sheets will weigh
on the economy, WEO said.
Though several policy actions have been
taken recently in India, the WEO said further steps are crucial to
achieving faster and more inclusive growth.
These include
relaxing longstanding supply bottlenecks, especially in the energy,
mining, and power sectors, as well as labour and product market reforms,
and improving the business climate.
China, meanwhile, continues
to rebalance its economy toward domestic consumption and services and
away from credit-led investment.
Overall, the economy is expected
to grow by 6.8 percent and 6.3 percent in 2015 and 2016, respectively,
IMF said while making no revision relative to the April 2015 WEO despite
increased downside risks.
While Asia's growth has recently
disappointed, the region is expected to grow at a steady 5.4 percent in
2015-16, remaining the global growth leader, WEO said.
Asia's
growth should benefit from relatively strong labour markets and
disposable income growth along with the ongoing gradual recovery in
major advanced economies.
Across most major Asian economies, lower commodity prices should help consumption.
Negative
risks to growth dominate, especially the possibility of a sharper
slowdown in China or larger spillovers from the changing composition of
China's demand.
In addition, further US dollar strength
accompanied by a sudden tightening of global financial condition could
also dim Asia's growth prospects.
High leverage could amplify
shocks, and lower commodity prices will also hurt corporate investment
in key commodity-producing sectors.
All in all, despite its resilient outlook, Asia is facing a challenging economic environment, the WEO said.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
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87.50
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84.65 |
Euro
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78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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