Near-term Growth Prospects Remain Favourable in India: IMF

The IMF is positive on the prospect of Indian growth but says some macroeconomic imbalances remain

IMF says faster-than-expected fall in inflation has created some room for policy rate cuts (Photo: Reuters)

Near-term growth prospects remain favourable in India but some macroeconomic imbalances still exist, the International Monetary Fund IMF) said ahead of the meeting of finance ministers of the G-20 countries in Turkey.

In a report entitled ‘Global prospects and policy challenges’ meant for the G-20 meeting of finance ministers in Ankara, the IMF sounds positive on India’s growth outlook and says some modest cuts in policy rates is possible. Here is more from that report:

• In India, while near-term growth prospects remain favourable and external vulnerabilities have decreased, some macroeconomic imbalances remain
• While the faster-than-expected fall in inflation has created space for considering modest cuts in the nominal policy rate, medium term inflationary pressures and upside risks to inflation remain
• With balance sheet strains in the corporate and banking sectors, financial sector regulation in India should be enhanced, provisioning increased, and debt recovery strengthened
• As one of the world’s largest commodity importers, growth in India will benefit from recent policy reforms, a consequent pickup in investment, and lower commodity prices
• Global growth in the first half of 2015 was lower than in the second half of 2014, reflecting a further slowdown in emerging economies and a weaker recovery in advanced economies.
• Emerging market currencies have generally depreciated, reflecting weakening commodity prices, concerns about the growth transition in China, an increase in risk aversion and expectations of a lift-off in policy rates in the US