Slump is over, time for growth: IMF

It upped its 2014 India growth forecast to 5.6 per cent

International Monetary Fund (IMF)'s Economic Counsellor Olivier Blanchard presents the World Economic Outlook at the IMF Headquarters in Washington September 20, 2011. European countries are warming to the idea that banks in the region need to boost their capital to withstand potential losses from Europe's sovereign debt crisis, Blanchard said on Tuesday. REUTERS/Stephen Jaffe/IMF/Handout (UNITED STATES - Tags: POLITICS BUSINESS HEADSHOT) FOR EDITORIAL USE ONLY. NOT FOR SALE FOR MARKETING OR ADVERTISING CAMPAIGNS. THIS IMAGE HAS BEEN SUPPLIED BY A THIRD PARTY. IT IS DISTRIBUTED, EXACTLY AS RECEIVED BY REUTERS, AS A SERVICE TO CLIENTS

In what could be good news to the Modi government, the International Monetary Fund (IMF) has said India has recovered from the economic slowdown. It expects economic growth to increase in the rest of 2014 and in 2015, spurred by a continuing pick-up in exports and investments that it projects will more than offset the effect of an unfavourable monsoon on agricultural growth.

In the World Economic Outlook released by it here on Tuesday, the IMF projected slightly stronger growth in India in 2014 than its April Outlook projection — from 5.4 per cent to 5.6 per cent — and kept its 2015 projection unchanged at 6.4 per cent.

Optimistic

The Reserve Bank of India, in contrast, has said India has not fully recovered yet from the slowdown. The IMF India forecast is more optimistic than that of the RBI, which, on September 30, said it expected growth during the remaining of 2014 to slow from the 5.7 per cent recorded in April-June and not to pick up before December.

“India has recovered from the slump thanks to policy decisions and renewed confidence,” Olivier Blanchard, IMF Chief Economist, said at a press conference on the Outlook’s release here.

Structural reforms should continue in all economies, though the agenda varies across countries, the Outlook recommended. For India, it specifically recommended improvement of investment conditions.

The Outlook cut its world Gross Domestic Product growth to 3.3 per cent in 2014 and 3.8 per cent in 2015. The forecasts in April were 3.4 per cent for 2014 and 4 per cent in 2015. The Outlook, however, projects that the uneven global recovery is likely to continue despite setbacks.

World growth in the first half of 2014 was less than the levels the IMF projected in its April Outlook, reflecting a number of negative surprises such as unexpected weaker GDP growths in both China and the U.S. during January-April and rising geopolitical risks.

However, the Outlook notes that China has implemented measures to buttress its economy which have supported faster growth in April-June. The IMF’s China 2014 growth forecast remains unchanged at 7.4 per cent. The 2015 forecast too remains at the April level of 7.1 per cent.

“The world forecast is down starting with already low numbers, but it hides different economies are at different levels of adjustments [to the post Lehman 2008 collapse global economic slowdown] with some struggling still while others already or nearly recovered,” Mr. Blanchard told reporters here.

Growth in emerging markets and developing economies is projected to increase modestly in the second half of 2014 and into 2015, supported by stronger domestic demand for goods and services as well as a recovery in external demand arising out of faster growth in advanced economies.