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IMF: India will Grow at 7.7% in 2018-19

The International Monetary Fund in its regional economic outlook has predicted the growth rate of India as 7.2% in the 2017-18 fiscal and 7.7% in 2018-19 fiscal. The report has stated that the disruptions caused by the demonetisation would be offset by a favorable monsoon and continued progress in resolving supply-side bottlenecks. However, it has predicted the investment recovery to remain modest and uneven across sectors. Though weaknesses in bank and corporate balance sheets is likely to affect the near term credit growth, the report cites confidence and policy credibility gains and continued fiscal consolidation and anti-inflationary monetary policy to be the factors that underpin macroeconomic stability.

According to the report, IMF has recommended the removal of long-standing structural bottlenecks to enhance market efficiency. The report has revised the growth downward in India due to effects from the currency exchange initiative and in South Korea due to political uncertainty.

According to the report, improving agricultural productivity in the labour-intensive agricultural sector remains a key challenge. It has said that much more needs to be done to address structural bottlenecks and improve market efficiency. Liberalising commodity markets as per the report will help in infusing more flexibility in the distribution and marketing of farm produce and will enhance the competitiveness, efficiency, and transparency in state agriculture markets. IMF has said that input subsidies to farmers should be administered through direct cash transfers as underpricing of agricultural inputs would have large negative impacts on agricultural output.

IMF

International Monetary Fund (IMF) was established on December 27, 1945 with stated objectives to promote international economic cooperation, international trade, employment, and exchange rate stability, including by making resources available to member countries to meet balance of payments needs. Its headquarters are in Washington, D.C. The IMF works to improve the economies of its member countries.

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IMF cuts India’s FY17 growth rate to 6.6% from 7.6%  

The World Economic Outlook (WEO) update released by the International Monetary Fund (IMF) has cut India’s growth rate for the fiscal year 2016–17 to 6.6% from its previous estimate of 7.6%.

India’s growth rate was cut due to the temporary negative consumption shock of demonetisation. It has dampen India’s growth by 1% point in the FY2017 and 0.4% point in FY2018, compared with IMF’s earlier projections.

Key highlights of IMF’s Outlook
  • Global economic activity will pick up pace in FY17 and FY18, especially in emerging markets and developing economies. Global growth is forecast at 3.4% in FY17 against 3.1% in FY16.
  • There is marginal upward shift in prospects for the US and China until 2018 but India, Mexico and Brazil are among the large economies that have had their projections revised downwards.
  • For China, the growth forecast for FY 2017 was revised upwards, to 6.5%, 0.3% point above the October 2016 forecast. In 2018, China’s growth rate is projected to be 6% against India’s 7.7%.
  • The recent election of Donald Trump as US President could have a positive impact on US economy, but extent of it could not be gauged immediately.
  • The stimulus policies expected and already underway in US and China will hold world economy from further slowdown and result in rise of global growth.
  • India’s Demonetisation move led to shortage of currency causing a slump in demand and widespread job losses dampening growth.
  • Other Asian countries such as Thailand and Indonesia will also face headwinds in medium term.

IMF forecast

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G-20 to combat terrorism, tackle uneven global economic growth unitedly

G-20 leaders have decided to tackle global uneven economic growth and reaffirmed their commitment to fight terrorism unitedly.

In this regard, G-20 leaders have released a communiqué at the end of the two-day 2015 G-20 summit held at Antalya in Turkey.

Key highlights of 2015 G-20 Antalya Summit

  • Economic growth: G-20 leaders noticed the risks and uncertainties in financial markets and observed that geopolitical challenges are increasingly becoming a global problem.
  • They have reaffirmed its earlier goal of achieving 2 percent additional GDP growth by 2018.
  • Black Money and Corruption: G-20 has developed a package under the “Base Erosion and Profit System” project to tackle the problem of transferring profits to tax havens.
  • The project urges the automatic exchange of tax-related information system and will come into force by 2018.
  • G-20 leaders also called for intolerance to corruption and collectively deny safe havens to illegally acquired wealth.
  • Climate Change: G-20 leaders reiterated from their commitment to limit global temperature increase to 2 degrees Celsius above current levels as mentioned in the Lima Call for Action.
  • They fair and balanced outcome in the Conference of Parties (CoP)-21 meet to be held in Paris on the issue.
  • WTO: G-20 leaders reinstated their faith on the World Trade Organisation (WTO) as the backbone of the multilateral trading system.
  • They have urged WTO to fully implement the Bali Package that aims at lowering global trade barriers.
  • G-20 leaders endorse global food security measures.
  • Refugee crisis: It is a global concern and seeks to encourage global contribution in managing the crisis.
  • IMF Reforms: G-20 leaders seek to early implementation of the International Monetary Fund’s (IMF’s) governance reforms.
  • Remittance front: G-20 leaders seek to reduce the charges for people to send money back home to 5 percent.
  • Terrorism: G20 leaders condemned terrorism and have collectively resolved to choke terror funding and also share information and take action for better border management.

2015 G-20 Antalya Summit and India

  • The 2015 G-20 Antalya Summit accommodates several concerns India which were raised in various multilateral forums.
  • Being the largest recipient of remittances, Prime Minister Narendra Modi had insisted to lower the charges and it has been included in G-20 agenda which is considered a positive development.
  • The passage of collective movement under the “Base Erosion and Profit Shifting” project on for tax evasion is also considered a positive development in India’s fight to tackle menace of Black Money.
  • The summit also took note of India’s viewpoints on various issues including trade, labour, infrastructure and corruption.

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