India's GDP to grow by 3.75 per cent in 2013, 5 per cent in 2014-IMF World Economic Outlook

International Monetary Fund (IMF) in its World Economic Outlook (WEO) scaled down India's growth prospects and projected India's GDP to grow by 3.75 per cent in 2013 from 5.7 per cent estimated earlier with strong agriculture production offset by lackluster activity in manufacturing and services, and monetary tightening adversely affecting domestic demand. For fiscal year 2014, growth is projected to accelerate somewhat to 5 percent, helped by an easing of supply bottlenecks and strengthening of exports.

IMF in April 2013 projected India's GDP to grow by 5.7 per cent in 2013 from four per cent in 2012 as a result of improved external demand and recently implemented progrowth measures. The IMF projections were 0.2 percentage points lower than its earlier estimate for 2013. For 2014, the Fund scaled down its projections for India's economic growth by two percentage points to 6.2 per cent.

The report stated that in terms of GDP at factor cost, India's growth is estimated to be 5 per cent in fiscal year 2012, at 4.25 per cent in 2013 and at about 5 per cent in 2014.

The report stated "during the first half of 2013, growth in Asia generally moderated and was weaker than anticipated in the April 2013 WEO. This was due to a more rapid slowdown in the pace of growth in China, which affected industrial activity in much of emerging Asia, including through supply-chain links, while India faced persistent supply-side constraints. By contrast, Japan was the main bright spot, reflecting the new policy momentum, which has boosted asset prices and private consumption."

The World Bank said tighter financial conditions have affected India. It further, stated that more tightening may be called in India for given continued inflation pressure, further amplified by currency depreciation and the recent market pressure has put a further premium on strengthening public finances and implementing structural reforms.

On the fiscal side WEO reported, high deficits make fiscal consolidation a priority in a number of economies, such as India, Japan, and Vietnam.

Further, the IMF has projected India's CAD at 4.4 per cent of the GDP in 2013, only slightly lower than 4.8 per cent in the previous year and 3.8 per cent in 2014.

IMF projected the CPI inflation to be 10.9 per cent in 2013, up from 10.4 per cent in 2012. However, for 2014, IMF pegged this inflation to be 8.9 per cent.

"Emerging market and developing economies are projected to expand by about 5 per cent in 2014, as fiscal policy is forecast to stay broadly neutral and real interest rates to remain relatively low," the report said. The IMF report said emerging market and developing economy growth rates are now down some 3 percentage points from 2010 levels, with Brazil, China and India accounting for about two-thirds of the decline.

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