International Monetary Fund Current Affairs
The International Monetary Fund (IMF) in its report has projected India’s GDP growth 7.3% in the 2018-19 fiscal and 7.5% in 2019-2020 on strengthening of investment and robust private consumption. India’s near-term macroeconomic outlook for India is broadly favourable.
Key Highlights of IMF Report
Headline inflation: It is projected to rise to 5.2% in fiscal year 2018/19, as demand conditions tighten, along with recent depreciation of rupee and higher oil prices, housing rent allowances and agricultural minimum support prices. But it has averaged 3.6% in fiscal year 2017/18 which 17-year low, reflecting low food prices on return to normal monsoon rainfall, agriculture sector reforms, subdued domestic demand and currency appreciation.
Current account deficit (CAD): It is projected to widen further to 2.6% of GDP on rising oil prices and strong demand for imports. CAD will be offset by slight increase in remittances
Financial sector reforms: They have been undertaken to address twin balance sheet problems, as well as to revive bank credit and enhance efficiency of credit provision by accelerating cleanup of bank and corporate balance sheets. India’s stability-oriented macro-economic policies and progress on structural reforms are continuing to bear fruit.
Way Forward: Continued fiscal consolidation is needed for India to lower elevated public debt levels, supported by simplifying and streamlining GST structure. Further, while important steps have been taken to improve recognition of Non-Performing Assets (NPAs) and recapitalise Public Sector Banks (PSBs), more needs to be done. Persistently-high household inflation expectations and large general government fiscal deficits and debt are still key macroeconomic challenges.
PSB Reforms: Large fraud in PSBs highlights financial sector weaknesses and underscores need for government to take further steps to improve PSBs’ governance and operations, including by considering more aggressive disinvestment.
Economic risks: Domestic economic risks are tilted to downside and external side risks include further increase in international oil prices, tighter global financial conditions, retreat from cross-border integration including spillover risks from global trade conflict and rising regional geopolitical tensions. Domestic risks pertain to tax revenue shortfalls related to continued GST implementation issues and delays in addressing twin balance sheet problems and other structural reforms.
The International Monetary Fund (IMF) in its October World Economic Outlook (WEO) has lowered India’s economic growth forecast at 6.7% in 2017 and 7.4% in 2018.
It is slower than 0.5 and 0.3 percentage points projected earlier by IMF. In April 2017 forecast, IMF had revised upwards India’s growth performance for 2016 to 7.1% as opposed to 6.8%
The report has cited impact of demonetisation and implementation of Goods and Services Tax (GST) for expected slowdown during the current and the next year. It also held that India’s slowdown is happening even as the world economy is picking up steam. But it expects revival of growth in future due to structural reform.
India will regain fastest growing major economy tag next year when it is forecast to grow 7.4%, slower than earlier estimate of 7.7% but higher than China’s 6.5%. It also expects that the Indian economy to grow 8% in the medium term on the back of reforms undertaken so far.
IMF forecast is latest in series of downgrades in India’s growth prospects unveiled by other multilateral agencies such as World Bank, Asian Development Bank (ADB) and OECD. Earlier, RBI had lowered its growth forecast for 2017-18 to 6.7% from 7.3%.
World Economic Outlook (WEO)
The WEO is survey conducted and published by IMF. It is published biannually and partly updated two times a year. It portrays the world economy in the near and medium context, with growth projections for up to four years into the future. WEO forecasts include key macroeconomic indicators, such as GDP, inflation, fiscal balance and current account of more than 180 countries around the globe. It also deals with major economic policy issues.