With growth in India picking up after a favourable monsoon season and higher exports, the International Monetary Fund (IMF) expects a further increase, thanks to stronger structural policies supporting investment.



India’s growth is projected to reach 5.4 percent in 2014, rising to 6.4 percent in 2015 withglobal growth expected to increase in 2014 after having been stuck in low gear in 2013, says the IMF’s latest World Economic Outlook (WEO) Update.

The IMF forecasts global growth to average 3.7 percent in 2014?up from 3 percent in 2013?and to rise to 3.9 percent in 2015 with global activity and world trade picking up in the second half of 2013, as anticipated in the October 2013 WEO.

In advanced economies, final demand has increased broadly as expected. In emerging markets, a rebound in exports was the main driver of better activity, while domestic demand generally remained subdued except in China, IMF said.

“There will be more growth rotation from emerging market economies to advanced economies in 2014-15,” said Olivier Blanchard, the IMF’s chief economist and director of the IMF’s Research Department.

The overall picture is one of strengthening activity. But the IMF Update also points to important differences across major economies and regions.

Growth in the United States is expected to be 2.8 percent in 2014, up from 1.9 percent in 2013. This pickup is partly thanks to a reduction in the fiscal drag that will result from the recent budget agreement.

But the budget agreement also implies that most of the sequester cuts will remain in place in FY2015, instead of being reversed as assumed in the October 2013 WEO. So growth in 2015 is now expected to be only slightly higher than in 2014.

The euro area is turning the corner from recession to recovery. Growth is projected to strengthen to 1 percent in 2014 and 1.4 percent in 2015, WEO said.

Emerging market and developing economies are expected to see an increase in growth to 5.1 percent in 2014 and to 5.4 percent in 2015.

Growth in China rebounded strongly in the second half of 2013, due largely to an acceleration in investment.

The WEO Update, however, notes that the balance of risks is shifting only very slowly and important downside risks to the global growth outlook are still a concern.

For emerging market economies, the Update notes, increased financial market and capital flow volatility remain a concern given the announcement in December 2013 that the US Federal Reserve (Fed) will start tapering in early 2014.

Emerging market and developing economies, for their part, must carefully manage the risks from potential capital flow reversals, the IMF suggested.

(Arun Kumar can be contacted at arun.kumar@ians.in)

–Indo-Asian News Service ak/tb/dg