The International Monetary Fund (IMF) has predicted that India will enjoy a Gross Domestic Product (GDP) expansion growth of 7.5% in 2016 and 2017.
However, the IMF urged New Delhi to take steps to reduce its subsidies, initiate labour reforms and dismantle infrastructure bottlenecks to sustain strong growth.
In its World Economic Outlook, the IMF said India should continue fiscal consolidation, underpinned by revenue reforms and further reduction in subsidies.
In 2015, India’s growth was 7.3%, which would increase to 7.5% in the next two years of 2016 and 2017, IMF had said earlier.
Revival of sentiment, improved industrial activity and recovery on private investment are key factors for strong growth, the IMF report said.
Growth will continue to be driven by private consumption, the IMF said, adding that this has been made possible because of lower energy prices and higher real incomes.
It also said lower commodity prices, a range of supply side measures and a relatively tight monetary stance has resulted in a faster-than-expected fall in inflation in India, making room for nominal interest rate cuts.
The IMF Outlook said monetary conditions remain consistent with achieving the inflation target of five per cent in the first half of 2017, although an unfavourable monsoon and an expected public sector wage increase pose upside risks.
The IMF has, however, upgraded its China growth forecast by 0.2 percentage point for this year and the next to 6.5% and 6.2%, respectively.
China clocked 6.9% growth in 2015 when India had recorded 7.3% expansion.