NEW DELHI: With the aftershocks of demonetisation running their course and key reforms beginning to show results, India’s economic growth outlook has improved, the International Monetary Fund (IMF) said on Wednesday.
However, the multi-lateral agency has flagged vulnerabilities in the country’s banking system. “Among emerging economies elsewhere, reflecting the long period of favourable financing conditions, corporate leverage (eg, in India, Indonesia, and Turkey) and bank vulnerabilities (eg in India) increased as well.”
In a note for the G20 leaders ahead of their two-day summit on July 7-8 in Hamburg, Germany, the multi-lateral agency said there was ‘cautious optimism’ about the global economy but policy efforts were still needed to strengthen the recovery.
“The global recovery continues, even as the composition of growth is shifting among the large economies... we expect global growth to be around 3.5 per cent this year and next,” IMF Managing Director Christine Lagarde said. According to IMF, even though global growth momentum remains on track, some of the forces driving the recovery are adding to already high vulnerabilities and external imbalances.
“At the same time, weak productivity growth and a lack of inclusiveness limit the growth outlook going forward,” it said, adding that other downside risks include an abrupt adjustment of financial vulnerabilities and the risk of anti- globalisation sentiment feeding into inward-looking policies.