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Business News/ Politics / Policy/  IMF admits India growth projections were way off the mark
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IMF admits India growth projections were way off the mark

Growth forecast errors from 2011 till 2014 were -0.9, -2.3, -1 and 0.7 respectively, averaging -0.9 percentage points between 2011-2014

The wrong projection for India also contributed -0.06 percentage points to the IMF’s global forecast error during 2011-2014 as India’s share in the global economy is 6.5% in purchasing power parity terms. Photo: BloombergPremium
The wrong projection for India also contributed -0.06 percentage points to the IMF’s global forecast error during 2011-2014 as India’s share in the global economy is 6.5% in purchasing power parity terms. Photo: Bloomberg

Indian policymakers and economists have long questioned the growth projections made for the country by the International Monetary Fund (IMF).

Now, in its latest World Economic Outlook released on Tuesday, the fund confessed as much—that its growth projections for India and the other emerging market economies have been way off the mark in the recent past.

Former finance minister P. Chidambaram had publicly taken on the IMF in October last year for its below-expectation growth projection for India, urging it to review its methodology for growth forecasts. His comments came after the IMF had cut its growth projection for 2013-14 to 3.8% based on market prices from 5.6% projected in April 2013.

“I would like to ask, respectfully, what is the information that IMF has gathered between July and September, that we do not have, that has impelled the fund to drastically change the estimate? We do not share this pessimistic outlook," Chidambaram had said speaking at the annual meeting of the fund in Washington DC.

On Tuesday, the IMF in its latest report said half of its overall global forecast errors were due to its wrong projections for BRIC (Brazil, Russia, India and China) countries which account for 28% of the global gross domestic product (GDP) at purchasing power parity. “One-year-ahead forecasts for global growth in 2011-14 were, on average, too optimistic—some 0.6 percentage point higher than outcomes," it said.

For India, the growth forecast errors from 2011 till 2014 were -0.9, -2.3, -1 and 0.7 respectively, averaging -0.9 percentage points between 2011-2014. The wrong projection for India also contributed -0.06 percentage points to the IMF’s global forecast error during 2011-2014 as India’s share in the global economy is 6.5% in purchasing power parity terms.

IMF says the general tendency towards repeated growth projection errors in BRIC countries is because of the strong growth performance by these countries before and immediately after the global crisis. It also blames negative surprises in terms of expectations of growth in trading partners, domestic factors as well as forecasting errors in growth in investment in such countries.

No prizes for guessing who it does not blame for the errors.

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Published: 08 Oct 2014, 03:08 PM IST
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