New Delhi: The International Monetary Fund (IMF) on Monday forecast India's economic growth at 7.8 percent for the financial year 2018, way ahead of China's 6 percent growth for the same period.


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Continued reliance on policy stimulus measures, with rapid expansion of credit and slow progress in addressing corporate debt, especially in hardening the budget constraints of state-owned enterprises, raises the risk of a sharper slowdown or a disruptive adjustment in China, the IMF said in its latest World Economic Outlook (WEO) update released today.


These risks can be exacerbated by capital outflow pressures especially in a more unsettled external environment, the IMF said.


As for India's growth, it is likely to revive to go back to its previously estimated growth rate of 7.7 percent in 2018, according to the WEO update.


This statement comes after the IMF cut India's growth forecast for the year 2017 by 1 percent to 6.6 percent from earlier forecast of 7.6 percent due to the demonetisation move.


"In India, the growth forecast for the current (2016-17) and next fiscal year were trimmed by one percentage point and 0.4 percentage point, respectively, primarily due to the temporary negative consumption shock induced by cash shortages and payment disruptions associated with the recent currency note withdrawal and exchange initiative," the IMF said in the report.


In 2015, India has overtaken China as the fastest growing economy in the world with a 7.3 percent growth, cementing its position as one of the sole bright spots in a flailing global economy.