They faced a combination of negative factors threatening to worsen the current slowdown to 3.1 per cent in 2015, even six years after the financial meltdown of 2008, which called for nothing less than strong, co-ordinated actions to reinvigorate growth and lessen the current global uncertainties. A set of 'right policies, strong leadership and global cooperation' is urgently needed, IMF Managing Director M. Christine Lagarde pointed out at the outset.

She has urged all nations to upgrade their policy recipe to restore elan to the world economy. Three major factors contributing to global slowdown are the prospect of rising US interest rates, China's painful readjustment to lower, sustainable growth, and rapid drop in commodity prices. With right policies, the crisis-like situation could be managed, she said.

IMF's Regional Outlook for Asia and the Pacific, released as part of these annual meetings, draws attention to the loss of growth momentum in Asia, particularly Emerging Asia, a grouping of 7 nations including China and India, as well as among other developing countries in the region.

Emerging Asia, the global economic power-house till recently, is faced with more challenging times over the next two years with its growth rate declining from 6.8 per cent in 2014 to a projected 6.5 in 2015 and 6.3 per cent in 2016. This essentially reflects an uncertain pace of China's growth slowdown with global repercussions and financial market volatility which remains high. Asia as a whole, still the global growth leader, will also remain stuck at 5.4 per cent in 2015-16

India's growth rate has been reduced to 7.3 per cent - at last year's level – for 2015 (fiscal 2016) from the earlier 7.5 per cent but the projection is retained at 7.5 per cent for 2016/17. This reduction, IMF officials pointed out, was in view of the more difficult external environment in general. Although India is also an open economy, it is not as open as China, and so when external demand weakens, Indian exports suffer. That has also pushed down the growth forecast for India.

On the positive side, the more favourable external development is the decline in commodity prices which, for an importing country like India, has helped to bring down inflation. While the export outlook is less rosy, the domestic demand component of growth looks “resilient and strong,” IMF spokesman noted.

According to the Regional Outlook, Asia’s growth rests on relatively strong labor markets and a disposable income rise along with ongoing gradual recovery in major advanced economies. For most major Asian economies, lower commodity prices should help consumption.

But negative risks to growth dominate, especially the possibility of a sharper slowdown in China or larger spillovers from the changing composition of China’s demand. In addition, further U.S. dollar strength accompanied by a sudden tightening of global financial conditions in the wake of a rate hike by US Fed before the end of the year poses risks of capital outflows from emerging market economies.

In this challenging environment, the IMF Outlook calls for ' carefully calibrated macroeconomic policies and a renewed impetus on structural reforms' in emerging Asia to facilitate investment and improve economic efficiency, bolstering economic resilience, and potential growth.

For India, lower global oil prices have boosted ongoing economic activity and underpinned a further improvement in the current account and fiscal position and a sharp decline in inflation. Exports have dropped sharply, partly reflecting subdued global demand while current recovery is sustained by domestic demand.

An incipient recovery of investment is expected to contribute more to India's growth going forward, But in addition to policy actions taken recently, IMF says, further steps in relaxing longstanding supply bottlenecks, especially in the energy, mining, and power sectors, as well as labour and product market reforms, and improving the business climate are 'crucial to achieving faster and more inclusive growth'.

Reform agenda remains the holy grail of Modi Government though it has so far been unable to put through some of the major reforms like GST, apart from talking up the economy and reiterating resolve to contain revenue and fiscal deficits. It has had to reassure Government leaders abroad of its determination to push ahead with its reforms soon.

IMF says higher public infrastructure investment and initiatives to unclog raw material linkages and support the lending capacity of Indian banks should help crowd-in private investment. However, exports have weakened, with a continuous fall for nine consecutive months, depriving the economy of a growth impulse. The high corporate leverage and headwinds from weaknesses in India’s corporate and bank balance sheets will also weigh on the economy.

On medium-term growth prospects, with Government's keenness to hit 8 per cent at the minimum, IMF says structural reforms should remain a priority for this growth by facilitating investment and job creation, which would also help lower vulnerabilities in the near term.

Asia has also experienced large capital outflows and regional currencies have generally depreciated, according the Outlook. India which has also witnessed modest outflows in 2015 so far and is highly dependent on external flows to finance infrastructure would be affected, going by the forecast by the International Institute of Finance that net capital flows to emerging markets this year would be negative for the first time since l988.

In this kind of scenario, as global financial conditions tighten, rise in long-term US rates after lift-off of the policy rate from its present near zero level could led to a spike in global risk aversion. If further capital outflows from Asia are triggered, IMF sees higher domestic borrowing costs and another bout of weakening of Asian currencies. It would pose balance sheet risks for corporates and households with foreign exchange exposure.

The extent of deterioration in the global environment is substantially linked to the management of dominant risks for China's growth while the economy is being rebalanced toward domestic consumption and services away from credit-led investment. China has claimed that it grew by 7 per cent in the first half of 2015 and the latest IMF projection is 6 .8 per cent in 2015 and 6.3 per cent in 2016. (IPA Service)