Lowering India's growth projections a notch to 6.3 percent in 2014, the International Monetary Fund (IMF) has forecast that emerging market and developing economies are now expected to grow at a more moderate pace.
India's growth projections at 6.3 percent for 2014 and 5.6 percent for 2013 in the July update of IMF's World Economic Outlook are, respectively, 0.1 and 0.2 percentage points lower than forecast in the April 2013 WEO.
At 5 percent in 2013 and about 5.5 percent in 2014, growth in emerging market and developing economies as a whole would be some 0.25 percentage point slower, IMF said noting: "This embodies weaker prospects across all regions."
In China, growth will average 7.75 percent in 2013-14, 0.25 and 0.50 percentage point lower in 2013 and 2014, respectively, than the April 2013 forecast, the global financial watch dog said.
Forecasts for the remaining BRICS (Brazil, Russia, India, China, South Africa) countries have been revised down as well -- by 0.25 to 0.75 percentage point.
Many emerging market and developing economies face a trade-off between macroeconomic policies to support weak activity and those to contain capital outflows, IMF said suggesting that macroprudential and structural reforms can help make this trade-off less stark.
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Global growth will recover from slightly above 3 percent in 2013 to 3.75 percent in 2014, some 0.25 percent weaker for both years than the April 2013 projections, IMF forecast.
This is less than the forecast in the April 2013 WEO, driven to a large extent by appreciably weaker domestic demand and slower growth in several key emerging market economies, as well as by a more protracted recession in the euro area, it said.
Global growth increased only slightly from an annualised rate of 2.5 percent in the second half of 2012 to 2.75 percent in the first quarter of 2013, instead of accelerating further as expected at the time of the April 2013 WEO.
Growth in the US is projected to rise from 1.75 percent in 2013 to 2.75 percent in 2014, IMF forecast.
Downside risks to global growth prospects still dominate: While old risks remain, new risks have emerged, including the possibility of a longer growth slowdown in emerging market economies, IMF said.
This would be especially so given risks of lower potential growth, slowing credit, and possibly tighter financial conditions if the anticipated unwinding of monetary policy stimulus in the United States leads to sustained capital flow reversals, it said.
Stronger global growth will require additional policy action, IMF noted.
"Specifically, major advanced economies should maintain a supportive macroeconomic policy mix, combined with credible plans for reaching medium-term debt sustainability and reforms to restore balance sheets and credit channels," it suggested.
(Arun Kumar can be contacted at arun.kumar@ians.in)