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Overreliance on IMF forecasts for India is ill-advised

Tuesday, January 6, 2015

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.
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