World Economic Outlook: October 2017 – “Seeking Sustainable Growth”

World Economic Outlook (WEO) is an integral part of the surveillance of economic development and policies of both developing and developed nations by the International Monetary Fund (IMF). It is published biannually and forecasts macroeconomic indicators like GDP, Inflation, Current Account and Fiscal Balance.

The recently released WEO says that for the first time in a decade about 75 per cent of the global economy which is measured by GDP at Purchasing Power Parity (PPP) is accelerating but risks are also present.

Major risks

  1. Inflation is below target in most advanced economies.
  2. Tightening of financial conditions in the US could lead to volatility in financial markets and affect growth prospects.

According to WEO, the policy makers need to capitalize the recovery and sustain the momentum. However, it also depends on how the large economies use this opportunity to increase potential output.

WEO says that global recovery also demands greater cooperation among nations due to the evolving nature of trade. Despite some reduction, the risk of protectionism still prevails.

WEO & INDIA

  • Growth forecast for 2017: 6.7 percent (half percentage point cut)

This cut is due to the fall out of demonetization and the introduction of GST. However, the encouraging signs are shown by recent structural reforms undertaken by the Government which could lead to trigger recovery and may push the economy to 8 percent in the mid-term.

  • According to IMF, India needs to focus on simplifying and easing labour market regulations and land acquisition procedures in order to improve business environment.

(The World Bank in its South Asia Economic Focus (released on 9 October 2017) has also reduced India’s growth forecast to 7 per cent for 2017-18, from 7.2 per cent estimated earlier for the same reason as quoted by the WEO. However, like the IMF, the World Bank also posits a recovery to 7.4 per cent by 2019-20.)

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