IMF cuts India's growth forecast on weak global cues | business | Hindustan Times
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IMF cuts India's growth forecast on weak global cues

business Updated: Jul 16, 2012 23:04 IST
IANS
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With global recovery weakening further, the International Monetary Fund (IMF) has marginally reduced India's growth projections from 6.8% to 6.1% for 2012 and from 7.2% to 6.5% in 2013.

In the past three months, the global recovery, which was not strong to start with, has shown signs of further weakness, the 188-nation global financial monitor said on Monday releasing three July updates on global financial health.

Financial market and sovereign stress in the euro area periphery have ratcheted up, close to end-2011 levels. Growth in a number of major emerging market economies, notably Brazil, China and India, has been lower than forecast, IMF's World Economic Outlook said.

"This partly reflects a weaker external environment, but domestic demand has also decelerated sharply in response to capacity constraints and policy tightening over the past year," it said.

However, these developments will only result in a minor setback to the global outlook, with global growth at 3.5% in 2012 and 3.9% in 2013, marginally lower than in the April 2012.

But this would be so provided there is sufficient policy action to allow financial conditions in the euro area periphery to ease gradually and that recent policy easing in emerging market (EM) economies will gain traction, it said.

The July update of the Global Financial Stability Report (GFSR) also noted emerging markets are facing extraordinary uncertainty about external conditions impinging on their economic performance.

Earlier, policymakers across several EM economies were still worried about large-scale capital inflows and appreciation of their currencies, the GFSR said.

Such fears have given way to concerns about overly rapid depreciation and increased volatility, as currencies like the Brazilian real or the Indian rupee depreciated by between 15 and 25% in less than one quarter, the report said.