IMF’s World Economic Outlook (WEO) released yesterday upgraded its forecast for growth  in India to 5.6 per cent in 2014-15, up from its prior forecast of a 5.4 per cent. It maintained its growth forecast for the next FY at 6.4 per cent.

A statement by the organisation quoted chief economist Olivier Blanchard as saying:  "India has recovered from its relative slump, and, thanks in part to policy and a renewal of (economic) confidence, growth is expected to exceed five percent again."

This comes against the backdrop of what IMF calls a disappointing global growth and an uneven pace of recovery which is country-specific.

The forecast for global growth is predicted to be at an average of 3.3 per cent in 2014, remaining unchanged from the previous year; this is expected to rise to 3.8 per cent in 2015. This average covers the spectrum from 1.8 per cent in 2014 for advanced economies to 4.4 per cent for emerging markets for the same year.

 “The weaker than expected growth outlook for 2014 reflects setbacks to economic activity in the advanced economies during the first half of 2014, and a less optimistic outlook for several emerging market economies”, says the report.

The report outlines a number of increased short term and medium term downside risks, which, it says, could dent global confidence and growth. These include, amongst others: heightened geopolitical risks; possibility of easy financial conditions fuelling financial excess; stagnation in advanced economies resulting in low potential growth; and protracted low inflation or outright deflation, particularly in the euro area, which could pose a risk to activity and debt sustainability in some countries.

“The challenge for both advanced and emerging market economies, is to go beyond the general mantra of ‘structural reforms’, to identify which reforms are most needed, which reforms are politically feasible,” sums up Blanchard. More generally, Blanchard adds, policymakers need to “re-establish confidence through clear plans to deal with both the legacies of the crisis and the challenge of low potential growth”.