IMF trims India's GDP forecast to 7.4% for FY 2016-17 on Brexit fears

Washington: The IMF on Tuesday slightly trimmed India's growth projections to 7.4 percent for 2016 and 2017, a drop of 0.1 percent from its previous forecast, attributing it to a more sluggish investment recovery while declaring Brexit as a "spanner" in the global economic recovery.

The global lending agency also said that Brexit has resulted in global economic uncertainty.

"The outcome of the UK vote, which surprised global financial markets, implies the materialisation of an important downside risk for the world economy. As a result, the global outlook for 2016-17 has worsened, despite the better-than- expected performance in early 2016," the IMF said in its latest update if the World Economic Outlook.

Updating its growth projection from the one it issued in April 2017, the IMF said in 2016 and 2017 India is projected to grow at a rate of 7. 4 percent. This it said is a drop of 0.1 percent in both the years.

"In India, economic activity remains buoyant, but the growth forecast for 2016-17 was trimmed slightly, reflecting a more sluggish investment recovery," the IMF said.

In 2015, the Indian economy grew at 7.6 percent.

Maury Obstfeld IMF Economic Counsellor and Director of the Research Department said the UK's June 23 vote to leave the 28-nation European Union adds downward pressure to the world economy at a time when growth has been slow amid an array of remaining downside risks.

"The first half of 2016 revealed some promising signs ? for example, stronger than expected growth in the euro area and Japan, as well as a partial recovery in commodity prices that helped several emerging and developing economies.

"As of June 22, we were therefore prepared to upgrade our 2016-17 global growth projections slightly. But Brexit has thrown a spanner in the works," Obstfeld said.

The April outlook was for 3.2 percent global output growth in 2016 and 3.5 percent in 2017.

"For today?s update, we have reduced both of those projections by 0.1 percentage point, to 3.1 and 3.4 percent, respectively," she said.

According to IMF, China's growth rate in 2016 and 2017 would be 6.6 and 6.2 percent. The growth rate projection for China in 2016 is 0.1 percent more than the one announced in April.

"Brexit-related revisions are concentrated in advanced European economies, with a relatively muted impact elsewhere, including in the United States and China," the IMF said.