India's growth rate to surpass China's in 2016: IMF

The report said global growth will receive a boost from lower oil prices, which reflect to an important extent higher supply.

India is expected to grow at 6.3 per cent this year and 6.5 per cent in 2016 by when it is likely to cross China's projected growth rate, the IMF said on Tuesday while terming the new government's reforms as ‘promising’ but insisted that their implementation is key.

In 2014, India's growth rate was 5.8 per cent against China's 7.4 per cent, said the World Economic Report update released by the International Monetary Fund. India's growth rate in 2013 was five per cent as against China's 7.8 per cent.

India is projected to grow at 6.3 per cent in 2015 and 6.5 per cent in 2016, when it is likely to cross China's projected growth rate of 6.3 per cent, the IMF said.

"I think the reform plans of the new Prime Minister are promising.

“We are going to have to see the speed of the implementation," said Gian Maria Milesi-Ferretti, Deputy Director in IMF's Research Department.

Responding to a question, the IMF official said the effect of Prime Minister Narendra Modi-led government's economic reform would be difficult to predict as these are structural reforms and are growing gradually over the medium term.

"Key is going to be implementation," Milesi-Ferretti said.

According to the latest IMF report, in India, the growth forecast is broadly unchanged, however, the weaker external demand is offset by the boost to the terms of trade from lower oil prices and a pickup in industrial and investment activity after policy reforms.

The report said global growth will receive a boost from lower oil prices, which reflect to an important extent higher supply.

But this boost is projected to be more than offset by negative factors, including investment weakness as adjustment to diminished expectations about medium-term growth continues in many advanced and emerging market economies.

Global growth in 2015-16 is projected at 3.5 and 3.7 per cent, a downward revision of 0.3 per cent relative to the October 2014 World Economic Outlook.

The revision reflect a reassessment of prospects in China, Russia, the euro area and Japan as well as weaker activity in some major oil exporters because of the sharp drop in oil prices.

The United States is the only major economy for which growth projections have been raised, the IMF said.        

Investment growth in China declined in the third quarter of 2014, and leading indicators point to a further slowdown.