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IMF Lowers India's Growth Forecast Over Demonetisation, GST

File photo of IMF Headquarters. (Image: Reuters)

File photo of IMF Headquarters. (Image: Reuters)

India is likely to regain the tag of the fastest growth emerging economies of the world in 2018, the IMF said in its latest World Economic Outlook report.

Washington: The International Monetary Fund (IMF) on Tuesday lowered India’s growth projection to 6.7 % in 2017, 0.5 percentage points less than its previous two forecasts in April and July, attributing it to demonetisation and introduction of GST.

The IMF also lowered the country’s growth for 2018 to 7.4%, 0.3 percentage points less than its previous two projections in July and April. India’s growth rate in 2016 was 7.1 %, which saw an upward revision of 0.3 percentage points from its April report.

“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,” the IMF said in its latest World Economic Outlook report.

“Strong government spending and data revisions in India led to an upward revision of 2016 growth to 7.1% [6.8% in April], with upward revisions of about 0.2 percentage point, on average, for 2014 and 2015,” it said.

The latest report, released ahead of the annual meetings of the IMF and the World Bank here this week, puts China slightly ahead of India in terms of growth rate for 2017.

China is projected to grow at 6.8% in 2017, which is 0.1 percentage more than its two previous projections in April and July. However, India is likely to regain the tag of the fastest growth emerging economies of the world in 2018, with China projected to grow at 6.5% in 2018, it said.

The GST, which promises the unification of India’s vast domestic market, was among several key structural reforms under implementation that were expected to help push growth above 8% in the medium term, the report said.

“In India, simplifying and easing labour market regulations and land acquisition procedures are long-standing requirements for improving the business climate,” the report said.

Between 1999 and 2008, India on an average grew at a rate of 6.9%, the IMF said, adding that for the next three years its growth rates were 8.5% in 2009, 10.3% in 2010 and 6.6% in 2011. In 2012, 2013 and 2014, it grew at a rate of 5.5%, 6.4% and 7.5% respectively. In 2015, India clocked a growth rate of 8 percentage points.

For the year 2022, the IMF has projected a growth rate of 8.2%, against its growth projection of 6.7% in 2017 and 7.4% in 2018.