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India projected to grow at over 7 pc in 2017 & 2018

Global economy currently gaining momentum, says IMF

 

The International Monetary Fund (IMF) has projected India to grow at 7.2 per cent and 7.7 per cent in 2017 and 2018, respectively, up from 6.8 per cent in 2016.

 

Overall, as per an analysis by Mr Maurice Obstfeld, Economic Counsellor and Director of Research at IMF, "momentum in the global economy has been building since the middle of last year, allowing us to reaffirm our earlier forecasts of higher global growth this year and next. We project the world economy to grow at a pace of 3.5 per cent in 2017, up from 3.1 per cent last year, and 3.6 per cent in 2018. Acceleration will be broad- based across advanced, emerging and low-income economies, building on gains we have seen in both manufacturing and trade.

 

"Our new projection for 2017 in the April World Economic Outlook is marginally higher than what we expected in our last update. This improvement comes primarily from good economic news for Europe and Asia, as well as our continuing expectation for higher growth this year in the United States.

 

"Despite these signs of strength, many other countries will continue to struggle this year with growth rates significantly below past readings. Commodity prices have firmed since early 2016, but at low levels, and many commodity exporters remain challenged—notably in the Middle East, Africa and Latin America. At the same time, a combination of adverse weather conditions and civil unrest threaten several low-income countries with mass starvation. In Sub-Saharan Africa, income growth could fall slightly short of population growth, but not by nearly as much as last year.

 

Policy uncertainties & politics

 

"Whether the current momentum will be sustained remains a question mark. There are clearly upside possibilities. Consumer and business confidence in advanced economies could rise further—though confidence indicators are already at relatively elevated levels. On the other hand, the world economy still faces headwinds. For one thing, trend productivity growth remains subdued across the world economy, for complex reasons… that seem likely to persist for some time.

 

"Aside from the conjunctural policy uncertainties, a distinct set of threats comes from the growth in advanced economies of domestic political movements sceptical of international economic integration—no matter if integration is promoted through multilateral rules-based systems for the governance of trade, more ambitious regional arrangements such as the Euro area and European Union, or globally agreed standards for financial regulation. A broad withdrawal from multilateralism could lead to such self-inflicted wounds as widespread protectionism or a competitive race to the bottom in financial oversight—a struggle of each against all that would leave all countries worse off.

 

Out of the woods?

 

"So, the world economy may be gaining momentum, but we cannot be sure that we are out of the woods. How can countries safeguard and nurture the global recovery?

 

"There is no universal policy prescription for diverse economies at different conjunctural stages. Deflationary pressures have generally receded, but monetary accommodation should continue where inflation remains stubbornly below target levels. Growth-friendly fiscal measures, especially where there is fiscal space, can support demand where that is still needed and contribute to expanding supply and reducing external imbalances. All countries have opportunities for structural reforms that can raise potential output as well as resilience to shocks, although specific reform priorities differ across economies.

 

"Avoiding the damage from protectionist measures will require a renewed multilateral commitment to support trade, paired with national initiatives that can help workers adversely affected by a range of structural economic transformations, including those due to trade. Trade has been an engine of growth, promoting impressive per capita income gains and declines in poverty throughout the world, especially in poorer countries. But its benefits have not always been equally shared within countries, and political support for trade will continue to erode unless governments step up to invest in their workforces and aid the adjustment to dislocations.

 

International cooperation key

 

"International growth and stability rely on multilateral collaboration across a range of problems that spill over national borders—not just trade. The challenges include financial oversight, tax avoidance, climate, disease, refugee policy and famine relief. Historically, inclusive cooperative approaches to interdependence have worked best. National policymakers, however, must do the hard work to ensure that the gains from harnessing interdependence, which are substantial, are broadly shared."

 

Source: Exim News Service - Washington, April 19

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