The International Monetary Fund (IMF) in its latest update has downgraded its estimate for India's growth rate for the current fiscal year ending March 31, citing "temporary negative consumption shock" due to demonetisation. The multilateral agency expects India's growth rate to fall to 6.6 per cent for 2016-17, from its previous estimate of 7.6 per cent. India's economy had expanded at 7.6 per cent in 2015-16.
If the IMF's estimates hold true, China has pipped India as fastest growing major economy for 2016.'The IMF estimates India's growth numbers for the fiscal year (April to March) while China's numbers, like those of many other nations, are for the calendar year (January-December).
The IMF also trimmed India's growth forecast for the next fiscal (2017-18). India's economy is expected to grow at 7.2 per cent, as against its previous forecast of 7.6 per cent.
"In India, the growth forecast for the current (2016-17) and next fiscal year were trimmed by one percentage point and 0.4 percentage point, respectively, primarily due to the temporary negative consumption shock induced by cash shortages and payment disruptions associated with the recent currency note withdrawal and exchange initiative," the IMF said in its latest update on global growth on Monday.
For 2018-19, the IMF expects a strong revival in India's growth and estimates the country to grow at 7.7 per cent.
At the same time, the IMF raised its forecast for China's 2016 growth to 6.7 per cent from 6.6 per cent. "The growth rate in China was a bit stronger than expected, supported by continued policy stimulus," the IMF said. For 2017, IMF expects China's growth rate however to fall to 6.5 per cent.
Earlier, this month, another multilateral agency, the World Bank, had also downgraded India's growth estimate for 2016-17 due to demonetisation but said that the country will post a "still robust" growth of 7 per cent. In its first report after demonetisation of Rs 500 and Rs 1,000 denomination currency notes in November, the World Bank said the notes ban move could "continue to disrupt business and household economic activities". It had earlier estimated India's GDP or gross domestic product growth at 7.6 per cent.
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