Overreliance on IMF forecasts for India is ill-advised

Subject

IMF projections on India's GDP growth between 2006 and 2013.

Significance

In October 2014, the IMF forecast India's GDP growth at 5.6% and 6.4% in 2014 and 2015 respectively, compared with 5.0% in 2013. Since such growth forecasts increasingly dominate discussions on the state of an economy and influence financial markets, serious questions arise about their accuracy -- and therefore their utility.

Impacts

• Should IMF expectations of India's revival be frustrated, the Fund will call for further reform.
• In that case, IMF projections will be revised down, exacerbating capital flight risk.
• IMF projections carry more risks than benefits for countries, especially since they shape sovereign credit ratings.