IMF pegs FY14 GDP growth at 5.8%

In fact, P Chidambaram had earlier exuded confidence of bringing the growth back to 8% in two years

The International Monetary Fund (IMF) today pegged the country's gross domestic product growth at 5.8 per cent during the current financial year, against an estimated decadal-low of five per cent in 2012-13, and predicted it to be as high as 6.3 per cent in 2014-15.

The IMF’s growth forecast is lower than not only the Economic Survey’s projection of 6.1-6.7 per cent, but also that of its multi-lateral agency peer —World Bank — at 6.1 per cent for 2013-14.  

“Through removing bottlenecks, the country can grow faster. It includes capacity constraints and slow pace of clearances. These capacity constraints have external ramifications, too, as exports cannot keep up with demand,” said Naoyuki Shinohara, deputy managing director of the IMF, addressing a Federation of Indian Chambers of Commerce and Industry meet here

Finance minister P Chidambaram had earlier exuded confidence on bringing annual growth back to the eight-per cent mark in two years. Shinohara also batted for clearance of the land acquisition Bill, better labour market regulations and implementation of a goods and service tax, for pushing pre-crisis level growth back to the eight-per cent mark.

Shinohara also batted for clearance of land acquisition bill, better labour market regulations and implementation of goods and service tax, that would push growth back to 8-per cent mark of pre-crisis level.

The IMF added that corporate investment which began to fall in 2011, has now dropped three%age points as a share of GDP from pre-crisis level.

However, the IMF pegged world growth to be around 3.3% in 2013, and 4% in 2014 backed mainly by faster pace of growth in emerging economies like India.

The agency added that some advance economies like the US, Sweden and Switzerland are on the mend. It sees a modest growth recovery of the US economy to about 2% in 2013 and 3% in 2014. This is mainly due to the improving house prices, credit growth and easing of bank lending conditions.

Shinohara believes that recovery remains elusive for some economies like the Euro area and Japan. While raising concerns that the crisis has now extended to some core countries like France, IMF predicted a mild contraction of one-quarter of 1% this year in the Euro area. 

“Though internal devaluation is slowly taking place in the Euro area, these measures has not compensated for weak internal demand, weakness in banking sector and the lack of credit to drive investments,” he added.