The International Monetary Fund has retained its growth forecast for India this year at 7.5 per cent, largely driven by private consumption even as weak exports and sluggish credit growth weigh on the economy. India’s growth momentum is expected to be underpinned by private consumption, which has benefited from lower energy prices and higher real incomes.

In its latest Regional Economic Outlook for Asia and the Pacific, IMF said weak exports and sluggish credit growth (stemming from weaknesses in corporate sector and public sector banks’ balance sheets) will weigh on the economy. India remains on a strong recovery path, with GDP growth reaching 7.3 per cent in 2015, the Fund said adding that “India’s growth is projected to strengthen to 7.5 per cent in 2016 and 2017.”

The report noted that policymakers should capitalise on the favourable economic momentum to speed up the structural reform implementation. It further noted that the long-awaited goods and services tax should be implemented, as it would create a single national market, enhance economic efficiency, and boost GDP growth.

According to IMF, growth in Asia and the Pacific is expected to remain strong at 5.3 per cent this year and next. However, China and Japan, the two largest economies in Asia, continue to face challenges.