India to grow at 7.5%, overtake China: IMF

Report says lower oil prices will raise real disposable incomes in India, particularly among poorer households

Thanks to recent policy reforms, a consequent pickup in investment, and lower oil prices, overtaking China, India's growth is expected to strengthen from 7.2% in 2014 to 7.5% in 2015, according to IMF.

While India's growth is forecast to remain steady at 7.5% in 2016 too, China's growth is likely to fall from 7.4% in 2014 to 6.8% in 2015 and 6.3% in 2016, said the International Monetary Fund's latest World Economic Outlook (WEO).

Lower oil prices will raise real disposable incomes in India, particularly among poorer households, and help drive down inflation keeping it close to target in 2015, said the world economy's health report released Tuesday.

Several years of downgraded medium-term growth prospects suggest that it is also time for major emerging market economies to turn to important structural reforms to raise productivity and growth in a lasting way, the WEO said.

In the case of India, the suggested structural reform agenda includes removing infrastructure bottlenecks in the power sector and implementing reforms to education, labour, and product markets to raise competitiveness and productivity.

"In India, the post-election recovery of confidence and lower oil prices offer an opportunity to pursue such structural reforms," the WEO said.

Global growth remains moderate, with uneven prospects across the main countries and regions.

It is projected to be 3.5% in 2015, in line with forecasts in the January 2015 WEO Update.

Global growth prospects are uneven across major economies, says the IMF's latest WEO.

In advanced economies, growth is projected to strengthen in 2015 relative to 2014, but in emerging markets and developing economies it is expected to be weaker.

Overall, global growth is forecast at 3.5% in 2015 and 3.8% in 2016, broadly the same as last year. But this aggregate number masks the diverse developments.

"A number of complex forces are shaping the prospects around the world," said Olivier Blanchard, IMF economic counsellor and director of research.

"Legacies of both the financial and the euro area crises -- weak banks and high levels of public, corporate, and household debt -- are still weighing on spending and growth in some countries. Low growth in turn makes deleveraging a slow process."

Blanchard also noted that the combination of population aging, lower investment, and sluggish advances in productivity will lead to significantly lower potential growth both in advanced and emerging market economies.

"More subdued growth prospects lead, in turn, to lower spending and lower growth today," he said.

On top of these underlying forces, two major factors, both with major distributional implications, dominate the current scene: the decline in the price of oil and exchange rate movements, the WEO said.

"Large movements in relative prices, whether exchange rates or the price of oil, creates winners and losers," said Blanchard.

(Arun Kumar can be contacted at arun.kumar@ians.in)