Washington, July 9: Keeping its projections for India and China unchanged, the International Monetary Fund on Thursday forecast that India will grow a clip faster at 7.5 percent in 2015 and 2016, overtaking a slowing down China.
While India's GDP growth would go up from 6.9 percent in 2013 and 7.3 percent in 2014 to 7.5 percent over the next two years, China would slow down from 7.7 percent in 2013 and 7.4 percent in 2014 to 6.8 percent in 2015 and 6.3 percent next year, IMF said.
In 2016, growth is expected to strengthen to 3.8 percent, the report said attributing the small downward revision to global growth for 2015 to a setback to activity in the first quarter of 2015, mostly in North America.
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Nevertheless, the underlying drivers for a gradual acceleration in economic activity in advanced economies "easy financial conditions, more neutral fiscal policy in the euro area, lower fuel prices, and improving confidence and labour market conditions" remain intact, the report said.
In emerging market economies, the continued growth slowdown reflects several factors, including lower commodity prices and tighter external financial conditions, structural bottlenecks, rebalancing in China, and economic distress related to geopolitical factors, it said.
Growth in advanced economies is projected to increase from 1.8 percent in 2014 to 2.1 percent in 2015 and 2.4 percent in 2016, a more gradual pickup than was forecast in the April 2015 WEO.
The unexpected weakness in North America, which accounts for the lion's share of the growth forecast revision in advanced economies, is likely to prove a temporary setback, the update said.
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Growth in emerging market and developing economies is projected to slow from 4.6 percent in 2014 to 4.2 percent in 2015, broadly as expected.
In 2016, growth in emerging market and developing economies is expected to pick up to 4.7 percent, largely on account of the projected improvement in economic conditions in a number of distressed economies, including Russia and some economies in the Middle East and North Africa.
The projected pickup in global growth, while still expected, has not yet firmly materialised, according to the WEO update.
Raising actual and potential output through a combination of demand support and structural reforms continues to be the economic policy priority, the report said.
Efforts at implementing structural reforms remain urgent across advanced economies, both to tackle crisis legacies and to raise potential output.
In emerging market and developing economies, macroeconomic policy space to support demand is generally more limited but should be used to the extent possible, the report said.
Structural reforms to raise productivity and remove bottlenecks to production are urgently needed in many economies, the update suggested.