Retained India's growth projections due to lower oil prices: IMF

The Fund says economic activities in India are slower than expected

The International Monetary Fund (IMF) has said it retained projections for India's economic growth due to the positive effect of declining oil prices and not due to any recovery process. In fact, economic activities in India are slower than what the Fund had earlier expected.

"If we look at our global forecast for India, let me start with that, it is roughly unchanged. So it reflects on the one hand, a positive effect from oil prices, given that India is a large net oil importer," Gian Maria Milesi-Ferretti, Deputy Director, Research Department, with IMF, told a press conference held in Beijing.

The international crude oil price of Indian Basket stood at $45.30 a barrel on January 21, despite a moderate rise from $45.16 a barrel on the previous day.

On the other hand, economic activity has been a bit slower than "we expected and you also have somewhat slower external demand," he told reporters.

IMF slightly cut its forecast of India's economic growth to 6.3% for the next financial year from its October projections of 6.4% . It retained the forecast for this financial year, 2014-15 (ending March 31), at 5.6%.

In its World Economic Outlook Update, the IMF said it thought the country’s growth rate would be 6.5% for 2016-17.

Milesi-Ferretti said that  the reform plans of Prime Minister Narendra Modi were promising.

"We’re going to have to see the speed of implementation. The effects on the economy are going to be clearly due to the extent that these are structural reforms accruing gradually over the medium term," he said.

But again, a key is going to be implementation, he added. Transcript of the press conference is posted on the IMF web site. The IMF predicted world economic growth at 3.5% in 2015 and 3.7% the next year. Each is lower by 0.3 percentage points than its October forecast.

The US was projected to grow 3.6% in 2015 and 3.3% the next year, higher by 0.5 percentage points and 0.3 percentage points compared to the October projections. The US economy was forecast to grow 2.4% in the just-concluded year.

The US is the single largest importer-country of India's goods. The euro zone, largest destination of our merchandise export, was projected to expand 1.2% in 2015 and 1.4% next year, 0.2 percentage points and 0.3 percentage points slower than predicted by the Fund in October.

The euro zone economy contracted 0.5% in 2013 and was projected to recover to 0.8% growth in 2014.