New Delhi: India is projected to become the world’s fastest-growing major economy by 2016-17—the third year of the Narendra Modi government—with a growth rate of 6.5%, topping China’s 6.3%.

This projection by the International Monetary Fund (IMF) in its latest World Economic Outlook Update, released on Tuesday, follows similar projections by the World Bank on 14 January, that said India will grow at 7% in 2017-18, a tad higher than China’s 6.9%.

IMF projected in October that China’s growth in 2015 and 2016 will be lower than its estimates by 20 and 30 basis points, respectively. One basis point is one-hundredth of a percentage point. “The (Chinese) authorities are now expected to put greater weight on reducing vulnerabilities from recent rapid credit and investment growth and hence, the forecast assumes less of a policy response to the underlying moderation. This lower growth, however, is affecting the rest of Asia," IMF said.

IMF, however, lowered India’s growth projection for 2015-16 to 6.3% from 6.4% estimated in October last year.

“In India, the growth forecast is broadly unchanged, however, as weaker external demand is offset by the boost to the terms of trade from lower oil prices and a pickup in industrial and investment activity after policy reforms," it added.

IMF also pared down global economic growth for 2015 to 3.5% from 3.8% projected in October, mostly due to slower-than-expected performance by emerging market economies, especially Russia, China, Brazil, Saudi Arabia and Nigeria. The US is the only major economy for which growth projection has been raised to 3.6% in 2015 from 3.1% projected earlier.

“Global growth will receive a boost from lower oil prices, which reflect to an important extent higher supply. But this boost is projected to be more than offset by negative factors, including investment weakness as adjustment to diminished expectations about medium-term growth continues in many advanced and emerging market economies," IMF said.

Without naming any country, IMF said in many emerging market economies, macroeconomic policy space to support growth remains limited. “But in some, lower oil prices will alleviate inflation pressure and external vulnerabilities, thereby allowing central banks not to raise policy interest rates or to raise them more gradually," it added.

The World Bank last week said the Indian economy is in the middle of a slow economic recovery, aided by improving export momentum in line with rising demand from the US and a sharp slide in inflation. However, the bank cautioned that fiscal deficit and government debt ratio remain high in India, constraining policy space for any stimulus.

“The implementation of reforms and deregulation in India should lift FDI (foreign domestic investment). Investment, which accounts for about 30% of GDP (gross domestic product), should strengthen, and help raise growth to 7% by 2016, although this is contingent on strong and sustained progress on reforms. Any slackening in the reform momentum could result in a more modest or slower pace of recovery," the bank warned.

In a separate report titled World Economic Situation and Prospects, the United Nations, however, said India will continue to grow below China in 2016 at 6.3% against 6.8% for China.

Nagesh Kumar, head of the UN Economic and Social Commission for Asia and the Pacific’s South and South-West Asia Office, said China is a much larger economy than India and the latter has to grow and sustain high growth momentum for a long time to be a major contributor to global growth.

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