NEW DELHI: In its update to the World Economic Outlook released in October, the International Monetary Fund (IMF) has trimmed the growth forecast for India by one percentage point for the current financial year (2016-17) and by 0.4 per cent for 2017-18, primarily due to the temporary negative consumption shock induced by cash shortages and payment disruptions associated with the recent currency note withdrawal and exchange initiative — the demonetisation.
For India, data and forecasts were presented on a fiscal year basis and GDP from 2011 onward is based on GDP at market prices with FY2011/12 as a base year.
While the global growth for 2016 is now estimated at 3.1 per cent, in line with the October 2016 forecast, economic activity in both advanced economies and emerging market and developing economies is forecast to accelerate in 2017–18, with global growth projected to be 3.4 percent and 3.6 percent, respectively, again unchanged from the Fund’s October forecasts.
Advanced economies are now projected to grow by 1.9 per cent in 2017 and 2 per cent in 2018, 0.1 and 0.2 percentage points more than in the October forecast, respectively, states the outlook.
On the policy front, the Fund cautions that emerging market and developing economies enhancing financial resilience can reduce the vulnerability to a tightening of global financial conditions, sharp currency movements, and the risk of capital flow reversals.
With growth weak and policy space limited in many countries, continued multilateral effort is required in several areas to minimise risks to financial stability and sustain global improvements in living standards, the report notes.
Stressing on the need for multilateral and national efforts to crack down on tax evasion and prevent tax avoidance practices, the reports has urged countries to continue with the corrections in their financial system. Efforts to strengthen the resilience of the financial system must continue, including by recapitalising institutions and cleaning up balance sheets where necessary, ensuring effective national and international banking resolution frameworks, states the outlook.