India loses fastest growth tag to China; IMF cites note ban for rate cut

Hyderabad: The IMF on Monday cut India’s growth rate for the current fiscal year to 6.6 per cent from its previous estimate of 7.6 per cent due to the “temporary negative consumption shock” of note ban.

China has recorded a 6.7 per cent growth in 2016 and has edged past India with 0.1 percentage point. With this, India has lost the fastest growing tag among emerging economies.

Despite its status of the second largest economy, China still continues to be an emerging economy. India, however, is expected to regain its fastest growing economy status in 2017 as IMF has projected its economy to grow by 7.2 per cent as against China’s 6.5 per cent.

According to the IMF’s  World Economic Outlook (WEO), the Chinese economy will slowdown in 2017 by 0.2 per cent. This gives India an edge over China. The Indian economy is likely to revive to touch 7.7 per cent growth rate in 2018. India was forecast to clock 7.6 per cent growth in 2016. However, the demonetisation is expected to pull down the country’s growth potential and set it back by two years.

“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, due to the negative consumption shock induced by cash shortages and payment disruptions associated with the recent currency note withdrawal and exchange initiative,” the WEO said. The global growth for 2016 is now estimated at 3.1 per cent, in line with the October forecast.

Economic activity in both advanced econom-ies and emerging market and developing economies is forecast to accelerate in 2017-18, with global growth projected to be 3.4 per cent, unchanged from the earlier forecasts.