With global economic recovery remaining on track on the back of better performing emerging economies, growth in India is expected to pick up further in 2017 and 2018, the IMF has said.
"Growth in India is forecast to pick up further in 2017 and 2018, in line with the April 2017 forecast," the International Monetary Fund (IMF) said in its latest World Economic Outlook (WEO) report on Monday.
"Pick-up in global growth anticipated in the April World Economic Outlook remains on track," the IMF report said.
"While activity slowed following the currency exchange initiative, growth for 2016 -- at 7.1 per cent -- was higher than anticipated due to strong government spending and data revisions that show stronger momentum in the first part of the year," it said, referring to India's demonetisation measure as well as to the base year revisions in GDP calculations made by the Central Statistics Office.
"Growth out-turns in the first quarter of 2017 were higher than the April WEO forecasts in large emerging and developing economies.
"Inflation in advanced economies remains subdued and generally below targets; it has also been declining in several emerging economies such as Brazil, India and Russia," it added.
IMF projects India to grow at 7.7 per cent in 2018, estimating a significant increase against the backdrop of ongoing economic reforms.
"This forecast assumes continued strengthening of growth in commodity exporters, an acceleration of activity in India resulting from the implementation of important structural reforms and a successful rebalancing of China's economy to lower, but still high, trend growth rates," it said.
However, the IMF also listed further reforms that India must undertake, including replacing the demonetised currency and reducing labour and product market rigidities to ease firm entry and exit, expand the manufacturing base, and gainfully employ the abundant pool of labour.
In April, owing to the impact of demonetisation of high-value currency, the IMF had cut India's annual growth forecast by 0.4 percentage points to 7.2 per cent for 2017.
The IMF estimates a global growth rate of 3.5 per cent this year, which is projected to increase to 3.6 per cent in 2018.
"Global growth for 2016 is now estimated at 3.2 per cent, slightly stronger than the April 2017 forecast, primarily reflecting much higher growth in Iran and stronger activity in India following national accounts revisions," it said.
On the downside risks to its growth projections, the IMF said: "Monetary policy normalisation in some advanced economies, notably the US, could trigger a faster-than-anticipated tightening in global financial conditions.
"And other risks discussed in the April 2017 WEO, including a turn toward inward-looking policies and geopolitical risks, remain salient," it added.