The International Monetary Fund has expressed its broad support for the economic reforms undertaken by the Narendra Modi Government, commenting that the reforms are in the right direction.
“We have been broadly supportive of the reforms being undertaken by Modi’s government,” IMF spokesperson Gerry Rice said in reply to a question during a media briefing, adding: “We have been broadly supportive that those reforms are in the right direction.”
In a separate report on “Global Prospects and Policy Challenges”, ahead of the G-20 summit in Istanbul, Turkey this weekend, the IMF noted that India’s growth will benefit from recent policy reforms, a consequent pick-up in investment and lower commodity prices. Strong domestic demand in India should also be a positive factor in 2016, it said.
In contrast, the IMF expects China’s growth to decline “as excesses in real estate, credit and investment continue to unwind”.
Global growth in 2015 remains modest and uneven, as important transitions weigh on the outlook, said the report, noting the transitions include divergence of monetary policy in advanced economies, rebalancing in China, and the end of the global commodity super cycle.
It, however, expects global economic activity to accelerate in 2016, reflecting the continuation of a modest recovery in advanced economies and a rebound in emerging markets.
At the same time, the report cautions that “growth remains fragile and could be derailed if transitions are not successfully navigated”, adding that in an environment of declining commodity prices, reduced capital flows to emerging markets and higher financial market volatility, downside risks to the outlook remain elevated, particularly for emerging economies.
Three important factors cited by IMF include the US Federal Reserve’s bid to normalize monetary policy while other major currency areas may be easing further; moderation of China’s economy as it embarks on a historic rebalancing of its growth model; and the likely end to the decade-long commodity super cycle.