IMF lowers India’s growth forecast for year 2017,Side effects of demonetization, GST

NEW DELHI(PTI): The IMF on Tuesday lowered India’s growth projection to 6.7% in 2017, 0.5 percentage points less than its previous two forecasts in April and July, attributing it to demonetization and introduction of the GST.

Demonetisation

It also lowered the country’s growth for 2018 to 7.4 %, 0.3 % less than its previous two projections in July and April.

India’s growth rate in 2016 was 7.1%, which saw an upward revision of 0.3 % from its April report.

“In India, growth momentum slowed, reflecting the lingering impact of the authorities, currency exchange initiative as well as uncertainty related to the midyear introduction of the country-wide Goods and Services Tax,” the IMF said in its latest World Economic Outlook report.

“Strong government spending and data revisions in India led to an upward revision of 2016 growth to 7.1% (6.8% in April), with upward revisions of about 0.2% , on average, for 2014 and 2015,” it said.

The latest report, released ahead of the annual meetings of the IMF and the World Bank here this week, puts China slightly ahead of India in terms of growth rate for the year 2017. China is projected to grow at 6.8% in 2017, which is 0.1% more than its two previous projections in April and July.

However, India is likely to regain the tag of the fastest growth emerging economies of the world in 2018, with China projected to grow at 6.5% in 2018, it said. The GST, which promises the unification of India’s vast domestic market, is among several key structural reforms under implementation that are expected to help push growth above eight per cent in the medium term, the report said.

“In India, simplifying and easing labour market regulations and land acquisition procedures are long-standing requirements for improving the business climate,” the report said. Between 1999 and 2008, India on an average grew at a rate of 6.9%, IMF said adding that for the next three years its growth rates were 8.5% in 2009, 10.3 in 2010 and 6.6 in 2011.

In the years 2012, 2013 and 2014 it grew at a rate of 5.5%, 6.4 and 7.5 respectively. In 2015, India clocked a growth rate of 8% points. For the year 2022, the IMF has projected a growth rate of 8.2%, as against its growth projection of 6.7 in 2017 and 7.4 in 2018.