IMF Says India’s Growth to Outdo China’s

IMF Says India’s Growth to Outdo China’s

India's economy will grow much faster than forecast this year and next and outpace rival China, the IMF (International Monetary Fund) said on Tuesday, citing falling oil prices and a reform drive by the government of Prime Minister Narendra Modi.

The IMF said in its World Economic Outlook update that Asia's number three economy would expand 7.5 percent in 2015, up from a 6.3 percent prediction made in January, and remain the same next year. It had previously tipped 6.5 per cent expansion in 2016.

"Growth will benefit from recent policy reforms, a consequent pick-up in investment, and lower oil prices," the Washington-based Fund said.

The sharp rise in the US dollar against the euro and the yen is expected to be a major theme at the meeting of the world's top economic policymakers in Washington later this week. The currency moves have exposed some emerging economies as well.

The IMF said monetary policies are driving most of the currency movements, as the U.S. Federal Reserve prepares to raise rates while the European Central Bank and Bank of Japan maintain their monetary stimulus.

The government has forecast growth of 7.4 per cent for the year which ended in March -- overtaking China and making India, the world's fastest growing major economy, after changing the way it calculates gross domestic product.

The currency effects should boost global GDP, supporting demand in the still-troubled economies of the euro zone and Japan, the IMF said, raising its forecasts for both regions.

The IMF also cut its outlook for the United States, as a 10 percent appreciation in the dollar over the last six months dragged down net exports. But it said both the United States and China, whose yuan is linked to the dollar, have some policy space to offset the appreciation of their currencies.

The IMF said China, however, could still face a greater economic slowdown as it rebalances away from investment toward consumption-led growth.

The Fund also reiterated that many of the risks it highlighted in October, including geopolitical tensions and disruptive shifts in financial markets, could still derail the sluggish recovery.

"A world in which you have large movements in exchange rates ... is a more risky world, from a financial point of view," the IMF's chief economist, Olivier Blanchard, told reporters.

The Fund also highlighted the potential for shocks around the first U.S. interest rate hike in nearly nine years, which could prompt capital outflows from emerging markets.

The IMF said lower oil prices should add more than 0.5 percentage points to global economic growth by next year, but warned they could rise more quickly than expected and hurt global demand.

The IMF's managing director, Christine Lagarde, last week called the current level of growth "just not good enough" to help millions of people stuck without jobs, and again urged policymakers to pursue deeper reforms to boost economies' growth potential.