IMF Current Affairs

Indian economy to grow at 7.4% in 2018: IMF

In its latest World Economic Outlook (January 2018 update) released by International Monetary Fund (IMF), India is projected to grow at 7.4% of its gross domestic product (GDP) in 2018 as against China’s 6.8%.

The projection makes India fastest growing major economy following slowdown in 2017 due to demonetisation and implementation of goods and services tax (GST).

Key Facts

IMF has projected that global economy is expected to grow 3.9% this year, faster than 3.7% forecast earlier in October 2017. Some 120 economies, accounting for three quarters of world GDP, have seen pickup in growth in year-on-year terms in 2017. It is the broadest synchronised global growth upsurge since 2010.

IMF projected India’s GDP growth rate at 7.4% in 2018 and 7.8% in 2019. China, during the same period, is expected to grow at 6.8% and 6.4% respectively. The aggregate growth forecast for emerging markets and developing economies for 2018 and 2019 remain unchanged, with marked differences in outlook across regions.

Emerging and developing Asia will grow at around 6.5% over 2018-19, broadly the same pace as in 2017. The US will grow 2.7% and 2.5% in 2018 and 2019, respectively, higher by 0.4 and 0.6% point than earlier estimate.

World Economic Outlook (WEO)

The report contains analysis and projections of integral elements of IMF’s surveillance of economic developments and policies in its member countries and of developments in global financial markets and economic system. It is usually prepared twice a year and is used in meetings of the International Monetary and Financial Committee.

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IMF and WB jointly release Financial System Stability Assessment report

The International Monetary Fund (IMF) and World Bank (WB) has released the Financial System Stability Assessment (FSSA) and Financial Sector Assessment (FSA) respectively.

It was second comprehensive Financial Sector Assessment Program (FSAP) of Indian financial system undertaken by the joint IMF-World Bank team conforming to the highest international standards.

Financial System Stability Assessment (FSSA)

‎FSAP is joint program of IMF and WB involved in developing countries and region only. It undertakes a comprehensive and in-depth analysis of a country’s financial sector. ‎It is conducted every five years. Last FSAP for India was conducted in 2011-12 and the report was published by IMF in January 2013.

Highlights of 2017 FSAP

The FSAP assessment acknowledges India’s strong growth in recent years in both economic activity and financial assets. It also acknowledges many efforts undertaken by India like tackling Non-Performing Assets (NPAs), recent recapitalization measures for banks and introduction of special resolution regime, formalization of National Pension System (NPS) and making the pension sector regulator statutory.

It also acknowledged India’s efforts towards passing of Insolvency and Bankruptcy Code and setting up of Insolvency and Bankruptcy Board of India (IBBI) and initiatives such as ‘no frills’ account (under Jan DhanYojana) and introduction of unique biometric identification number (AADHAR).

It also acknowledged RBI’s substantial progress made in strengthening banking supervision by introducing of risk-based supervision in 2013 through comprehensive and forward-looking Supervisory Program for Assessment of Risk and Capital (SPARC) and Asset Quality Review (AQR) and strengthening of regulations in 2015 leading to improved distressed asset recognition.

It also acknowledged RBI’s Basel III framework and other international norms have been implemented or are being phased in. It acknowledges RBI’s move of establishing new Enforcement Department and revising Prompt Corrective Action (PCA) framework that incorporates more prudent risk-tolerance thresholds. ‎It has recommended that governance and financial operations of Public Sector Banks (PSBs) can be improved by developing strategic plan for their consolidation, divestment, and privatization.

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