India set to grow 6.7% in 2017: IMF

The International Monetary Fund (IMF) on Tuesday pared its growth forecast for India by half a percentage point to 6.7% for 2017, blaming the lingering disruptions caused by demonetisation of high-value currencies last year and the roll out of the Goods and Services Tax (GST). However, the Fund said the structural reforms undertaken by the Prime Minister Narendra Modi-led government would trigger a recovery-above 8% in the medium term.

In its latest World Economic Outlook, IMF said the world economy is going through a cyclical upswing that began midway through 2016. It raised the global growth estimate marginally for 2017 to 3.6% while flagging downside risks. The upward revisions in its growth forecasts including for the euro area, Japan, China, emerging Europe, and Russia more than offset downward revisions for the United States, the United Kingdom, and India.

“In India, growth momentum slowed, reflecting the lingering impact of the authorities’ currency exchange initiative as well as uncertainty related to the midyear introduction of the country-wide Goods and Services Tax,” it said in the WEO.

However, IMF expects India’s economy to recover sharply in 2018 to grow at 7.4%, though 30 basis points lower than its earlier estimate in April.

In its South Asia Economic Focus (Fall 2017) released on Monday, the World Bank reduced India’s GDP growth forecast to 7% for 2017-18 from 7.2% estimated earlier, blaming disruptions caused by demonetisation and the implementation of the GST, while maintaining that the economy would claw back to grow at 7.4% by 2019-20.

Both the Asian Development Bank as well as the Organisation for Economic Cooperation and Development (OECD) have also cut their growth projections for India to 7% and 6.7%, respectively, for fiscal 2017-18.

IMF said a gradual recovery in India’s growth trajectory is a result of implementation of important structural reforms. GST.

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