WASHINGTON: Like the World Bank, the IMF has lowered the global growth targets for 2015 and 2016 by 0.3 percent in both the years as its new projections are 3.5 percent and 3.7pc for the two years respectively.
However, the WB’s corresponding forecasts are 3 percent and 3.3 percent. The bright spot in the IMF’s report is this: India will be the fastest growing major economy in 2016, with projected GDP growth of 6.5 percent against China’s 6.3 percent. There is a possibility that India could surprise on the upside in 2016 for the simple reason that most economic signals – barring the external export environment – are turning positive. As long as the Modi government realises that growth depends on domestic reforms and not just luck, India should do better henceforth.
The Reserve Bank of India has announced its first rate cut last week by 0.25 percent. The future direction of rates is largely downwards. Investment should slowly start reviving this year, and accelerate in 2016. The government is planning to begin a massive public investment programme from 2015-16. While the exact size of the fiscal spend is not clear, minister of state for finance Jayant Sinha has indicated that the size of the war-chest being readied could be in the region of Rs 2,00,000-3,00,000 crore. This will surely give growth a pep in 2016 – possibly more than what the IMF expects.
