IMF cuts India's GDP forecast for FY17 to 6.6%

The International Monetary Fund (IMF) cut India's growth forecast for the current financial year (FY17) by 1% and cut it by 0.4% for the next fiscal year. The reason for this is primarily due to the demonetisation move taken by the government in November 2016.

This brings India's growth forecast in FY17 down to 6.6%, against the earlier estimate of 7.6%.

It said the move had resulted in temporary negative consumption shock which induced by cash shortages and payment disruptions.

This means that India will lose its “fastest growing economy” title to China. At the same time IMF in the World Economic Outlook report has upped its growth estimates of China. IMF during the same period increased China's growth to 6.7% in FY17 from a 6.5% growth projected in October.

The reason for this increase in growth of China is due to the expected policy stimulus by the government.

Earlier, the statistics department has revised the India's economic growth in 2016-17 to 7.1% from 7.6% in the previous year.

IMF further expects India's growth to pick up at a much slower pace in 2017-18 as it reduced its estimates to 7.2% from 7.6% earlier.