India's growth spillover unlikely outside South Asia: IMF

At the same time, the IMF warned of the adverse consequences of China's economic downtown

Even as India is now the fastest growing emerging economy in the world, its impact is unlikely to be felt beyond South Asia, senior IMF (International Monetary Fund) officials said on Friday. But, at the same time, they warned of the adverse consequences of China's economic downtown.

“India is obviously a major economy in its sub-region, in south Asia. We see the immediate neighbours benefiting a lot (from the Indian growth story),” Markus Rodlauer, deputy director, Asia and Pacific department, IMF, told reporters during a news conference.

“Its actual economic ties with southeast Asia and China are more limited, so the direct spillover from the growth in India, both on the trade side and on the financial side, is limited to the rest of Asia,” Rodlauer said when asked if the remarkable growth story of India would have an impact on the Asian economy.

India is the fastest growing emerging economy in the world, with growth rates at 7.5 per cent, both in 2016-17 (and 2015-16), said Changyong Rhee, director, Asia and Pacific Department, IMF.

"Activity is expected to continue to be underpinned by private consumption, which has benefited from lower energy," Rhee said as he warned that Asia faces continuing sizable spillovers from China.

China's transition can have adverse, albeit very heterogeneous, spillovers in the region, he said.

"Countries more exposed to consumption can be winners, while those more exposed to investment and manufacturing can lose in the near term. Through financial channels, China's spillovers are also on the rise, and much increased from the period before the global financial crisis," Rhee said. China's slowdown also has affected global commodity demand, but here too the effect is heterogeneous, he noted.

“Asia of course is impacted by the still weak global recovery, and by the ongoing and necessary rebalancing in China,” Rhee said.