Lowering India's growth projections by just a notch, the the International Monetary Fund (IMF) Tuesday predicted that this will rise to 5.75 percent in 2013 and 6.2 percent in 2014.
IMF's latest World Economic Outlook (WEO) released here Tuesday attributes the projected rise in India's growth to improved external demand and recently implemented pro-growth measures.
The new projections however, are 0.2 percentage points lower than those for for 2013 and 0.1 percentage points lower than those for 2014 in IMF's January update of the WEO
Significant structural challenges will also likely lower potential output in India over the medium term and also keep inflation elevated by regional standards, it said.
Projecting global growth at 3.3 percent in 2013, up to 4 percent in 2014, the IMF said the global economy is expected to continue mending gradually with developing, emerging economies persisting in leading global growth.
But with old dangers remaining and new risks emerging, policymakers cannot afford to relax their efforts, it warned, noting recovery was uneven in advanced economies with private demand in the United States improving faster than in the Euro area.
In emerging markets and developing economies, fiscal policy is expected to remain close to neutral, the IMF said as elevated growth will push debt ratios farther down to 30 percent of GDP by 2018.
However, some countries continue to face significant fiscal challenges, it said, citing the example of Middle Eastern oil importers with high energy subsidy spending, several emerging European economies and India.
Activity in emerging markets has been strong but less so than projected during the past couple of years, the IMF said. While cyclical factors have played a role, so have permanent shocks - markdowns to medium-term output have now reached almost 4 percent since the September 2011 WEO.
Policymakers must carefully consider the risks of policies falling behind the curve and becoming pro-cyclical, which would amplify rather than modulate the cycle, the IMF said voicing a concern that too much of the recent downturn is attributed to cyclical rather than structural factors.
In countries like India, Brazil and Russia, for instance, supply factors, such as infrastructure or labour market bottlenecks, and domestic policy factors, such as policy uncertainty and regulatory obstacles, have contributed to the recent stalling of investment, it said.
In Asia, growth has already returned to a healthy pace in China. External demand, solid consumption, a better monsoon season, and policy improvements are expected to lift activity in India too, IMF said.
