IMF’s Global Prospects and Policy Challenges written by its staff observe that India seems to be resilient amidst the current turmoil in the global economy. The report, published in the background of the G 20 Finance Minister’s meeting at Ankara finds that many problems applicable to the EMEs are not affecting India.
IMF notes that India is a remarkable gainer from the current trend of fall in commodity prices. “In India, one of the world’s largest commodity importers, growth will benefit from recent policy reforms, a consequent pickup in investment, and lower commodity prices.”
Positive momentum from strong domestic demand will provide buffer to Indian economy in the present phase. “In India, domestic demand is accelerating, underpinned by the large positive terms of trade shock (mostly due to collapsing commodity-import prices).”
There is a need to fasten structural reforms for India including expansion of infrastructure, and implementing reforms to education, labor, and product markets to raise competitiveness and productivity.
On the inflation front, the IMF warns that there is a chance for the return of inflation disturbance, especially in the medium term.
The report predicts that the emerging world cannot stop the world economy’s downward movement.
Steep currency depreciation, macroeconomic slowdown, financial sector weakness etc are risk factors for the emerging world.
Overall, IMF highlights a number of adverse factors engulfing the global economy including the turbulence in Global growth remains moderate, reflecting a further slowdown in emerging economies and a weak recovery in advanced economies.
In an environment of rising financial market volatility, declining commodity prices, weaker capital inflows, and depreciating emerging market currencies, downside risks to the outlook have risen, particularly for emerging markets and developing economies.
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