Near-term growth prospects remain favourable in India but some macroeconomic imbalances still exist, the International Monetary Fund IMF) said ahead of the meeting of finance ministers of the G-20 countries in Turkey.
In a report entitled ‘Global prospects and policy challenges’ meant for the G-20 meeting of finance ministers in Ankara, the IMF sounds positive on India’s growth outlook and says some modest cuts in policy rates is possible. Here is more from that report:
- In India, while near-term growth prospects remain favourable and external vulnerabilities have decreased, some macroeconomic imbalances remain
- While the faster-than-expected fall in inflation has created space for considering modest cuts in the nominal policy rate, medium term inflationary pressures and upside risks to inflation remain
- With balance sheet strains in the corporate and banking sectors, financial sector regulation in India should be enhanced, provisioning increased, and debt recovery strengthened
- As one of the world’s largest commodity importers, growth in India will benefit from recent policy reforms, a consequent pickup in investment, and lower commodity prices
- Global growth in the first half of 2015 was lower than in the second half of 2014, reflecting a further slowdown in emerging economies and a weaker recovery in advanced economies.
- Emerging market currencies have generally depreciated, reflecting weakening commodity prices, concerns about the growth transition in China, an increase in risk aversion and expectations of a lift-off in policy rates in the US
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