IMF reduces India’s growth forecast to 6.6% for 2016-17

The Dollar Business Bureau

The International Monetary Fund (IMF) has decreased India’s growth forecast to 6.6% for financial year 2016-17 as a result of demonetisation of high-value currency, a move taken by the government on November 8.  

The forecast has been reduced for the current fiscal by a full percentage point which might pave way for India to lose the title of the “fastest growing major economy” to China.

According to the update given to the World Economic Outlook by the international organisation in October, it was earlier expected that India would grow by 7.6%. It also highlighted that China witnessed a growth of 6.7% in 2016 against its previous projection of 6.6%. The country has a growth forecast of 6.5% for 2017 which has been raised from its earlier projection of 6.2% done in October. The same has been attributed to the “expected policy stimulus” in the Chinese economy.

While the Fund considered the period of April-March for calculating the growth rate for India, it followed the calendar year for the rest of the nations.

While citing its growth rate for the USA, the international body said that it forecasts an upswing in the country’s economy for the next two years, particularly in 2018. The forecast has been made on the basis of Donald Trump’s new policies which is expected to boost the country’s economic growth.

But the Fund also a projected a different view of the US economy if Trumps sticks to his protectionist trade proposals which can possibly lead to a trade war. This, according to the IMF, could be "quite destructive" for the global economy.