IMF pegs FY14 GDP growth at 4.25% - The Times of India
IMF pegs FY14 GDP growth at 4.25%
NEW DELHI: The International Monetary Fund (IMF) on Tuesday estimated theIndian economy to grow at 4.25% in 2013-14, hurt by lacklustre manufacturing and services sectors and slowdown in demand due to monetary tightening. Several multilateral agencies, economist and brokerages have scaled down India's growth projections for the current financial year after the April-June quarter data showed the economy expanded at its weakest pace in four years at 4.4%.
The IMF estimate is well below the 5-5.5% growth that the government expects in the current fiscal. The Indian economy slowed to a decade low of 5% in 2012-13, prompting calls for urgent measures to boost growth and revive sentiment.
In its latest World Economic Outlook (WEO), the IMF slashed India's growth projection to 3.8% for 2013 but expects it to rebound to 5% in 2014, helped by an easing of supply side bottlenecks and strengthening of exports. The 3.8% estimate is in terms of GDP at market prices, while Indian estimates are based on factor cost. In those terms, the IMF projection would be 4.25%. A separate report by theOECD said that the economic outlook for emerging Asia ( southeast Asia, China and India) remains robust over the medium term, anchored by the steady rise in domestic demand. GDP growth in emerging Asia is projected to moderate gradually but stay resilient over the 2014-18 period, with an average annual growth of 6.9%, albeit less than the 8.6% registered before the global financial crisis (2000-07). The region will continue to play an important role in global growth, the report added.
The IMF said growth in the BRICS countries such as Brazil and India was hurt by weak infrastructure and regulatory bottlenecks. It also said that consumer priceinflation is expected to stay high at around 11% in 2013 and 9% in 2014, driven by continued spike in domestic food prices. It said the recent market pressure has put a further premium on strengthening public finances and implementing structural reforms, particularly for a few countries such as India. The IMF report also said that high fiscal deficit makes fiscal consolidation a priority for several countries. In India and Indonesia, more monetary tightening may be called for, considering continued inflation pressure, further amplified by currency depreciation.
The Indian economy, Asia's third-largest, has slowed sharply due to a combination of factors including high interest rates, stubborn inflation, policy and regulatory delays, weak demand and slowdown in exports. While recent data has pointed to some tentative signs of a turnaround, economists say it is too early to term it as a revival.
The IMF forecast global growth to average 2.9% in 2013, down from the July estimate of 3.1% and below 3.2% recorded in 2012. It expects global growth to rise to 3.6% in 2014 driven by advanced economies. Growth in major emerging markets, although still strong, is expected to be weaker than the IMF forecast in its July 2013 WEO update. This is partly due to a natural cooling in growth, following the stimulus-driven surge in activity after the Great Recession. Structural bottlenecks in infrastructure, labour markets, and investment have also contributed to slowdown in many emerging markets, the report said.
"This transition is leading to tensions, with emerging market economies facing both the challenge of slowing growth and changing global financial conditions," said Olivier Blanchard, the IMF's chief economist and head of the research department. It said that these growth transitions, combined with an approaching turning point in US monetary policy, have led to new challenges and risks. In particular, long-term interest rates in the US and many other economies have increased more than expected.
"Although the US Federal Reserve recently decided not to slow the pace of its asset purchases yet and capital outflows from emerging markets have subsided somewhat, bond yields remain well above levels of early May. And, there is a distinct risk that financial conditions will tighten from their current, still supportive levels," the report said.
IMF pegs FY14 GDP growth at 4.25%
NEW DELHI: The International Monetary Fund (IMF) on Tuesday estimated theIndian economy to grow at 4.25% in 2013-14, hurt by lacklustre manufacturing and services sectors and slowdown in demand due to monetary tightening. Several multilateral agencies, economist and brokerages have scaled down India's growth projections for the current financial year after the April-June quarter data showed the economy expanded at its weakest pace in four years at 4.4%.
The IMF estimate is well below the 5-5.5% growth that the government expects in the current fiscal. The Indian economy slowed to a decade low of 5% in 2012-13, prompting calls for urgent measures to boost growth and revive sentiment.
In its latest World Economic Outlook (WEO), the IMF slashed India's growth projection to 3.8% for 2013 but expects it to rebound to 5% in 2014, helped by an easing of supply side bottlenecks and strengthening of exports. The 3.8% estimate is in terms of GDP at market prices, while Indian estimates are based on factor cost. In those terms, the IMF projection would be 4.25%. A separate report by theOECD said that the economic outlook for emerging Asia ( southeast Asia, China and India) remains robust over the medium term, anchored by the steady rise in domestic demand. GDP growth in emerging Asia is projected to moderate gradually but stay resilient over the 2014-18 period, with an average annual growth of 6.9%, albeit less than the 8.6% registered before the global financial crisis (2000-07). The region will continue to play an important role in global growth, the report added.
The IMF said growth in the BRICS countries such as Brazil and India was hurt by weak infrastructure and regulatory bottlenecks. It also said that consumer priceinflation is expected to stay high at around 11% in 2013 and 9% in 2014, driven by continued spike in domestic food prices. It said the recent market pressure has put a further premium on strengthening public finances and implementing structural reforms, particularly for a few countries such as India. The IMF report also said that high fiscal deficit makes fiscal consolidation a priority for several countries. In India and Indonesia, more monetary tightening may be called for, considering continued inflation pressure, further amplified by currency depreciation.
The Indian economy, Asia's third-largest, has slowed sharply due to a combination of factors including high interest rates, stubborn inflation, policy and regulatory delays, weak demand and slowdown in exports. While recent data has pointed to some tentative signs of a turnaround, economists say it is too early to term it as a revival.
The IMF forecast global growth to average 2.9% in 2013, down from the July estimate of 3.1% and below 3.2% recorded in 2012. It expects global growth to rise to 3.6% in 2014 driven by advanced economies. Growth in major emerging markets, although still strong, is expected to be weaker than the IMF forecast in its July 2013 WEO update. This is partly due to a natural cooling in growth, following the stimulus-driven surge in activity after the Great Recession. Structural bottlenecks in infrastructure, labour markets, and investment have also contributed to slowdown in many emerging markets, the report said.
"This transition is leading to tensions, with emerging market economies facing both the challenge of slowing growth and changing global financial conditions," said Olivier Blanchard, the IMF's chief economist and head of the research department. It said that these growth transitions, combined with an approaching turning point in US monetary policy, have led to new challenges and risks. In particular, long-term interest rates in the US and many other economies have increased more than expected.
"Although the US Federal Reserve recently decided not to slow the pace of its asset purchases yet and capital outflows from emerging markets have subsided somewhat, bond yields remain well above levels of early May. And, there is a distinct risk that financial conditions will tighten from their current, still supportive levels," the report said.
