India's economy is recovering and its ability to withstand external shocks has improved.

NEW DELHI: India's economy is recovering and its ability to withstand external shocks has improved. Terming Indian economy a ‘bright spot’ on the global economic landscape, IMF on Wednesday raised its growth forecast for the current fiscal to 7.2 per cent, even as it called for steps to revitalize the investment cycle and accelerate structural reforms in the country.

In an annual report, the IMF forecast that Asia's third-largest economy would grow by 7.5 percent in the 2015/16 fiscal year that starts on April 1, up from 7.2 per cent in the year now ending. However, Prime Minister Narendra Modi 's annual budget, the target growth forecast was up to 8.5 percent in 2015/16 - making India the world's fastest-growing large economy ahead of China.

The new forecasts have taken into account a revised methodology adopted by India earlier this year for calculating the GDP figures, about which IMF said that the country has "improved the way it measures economic output".

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The new methodology, however, has been termed as 'puzzling' initially by some including Chief Economic Advisor Arvind Subramanian and RBI Governor Raghuram Rajan. Incidentally, both Subramanian and Rajan have been with IMF in the past.

Last year, IMF had forecasted a growth rate of 5.6 per cent for the current fiscal, and 6.4 per cent for the next.

The Indian economy is reviving, helped by positive policy actions that have improved confidence and lower global oil prices, the IMF said, while anticipating stronger growth in the next fiscal on the back of stronger investment flows following improvements to the business climate.

To continue on this trend, India needs to revitalise the investment cycle and accelerate structural reforms, it said in its annual assessment report for the country.

"Indian economy is the bright spot in global landscape, becoming one of the fastest-growing big emerging market economies in the world," IMF said in a report after its recently concluded annual consultations with India.

"Growth numbers are now much higher and the current account deficit is comfortable, in part due to the fall in gold imports and lower oil prices," IMF Mission Chief for India Paul Cashin said.

"New investment project announcements have started to pick up, particularly in the power and transport sectors," he said, while adding that bolstering financial sector health and further financial inclusion would support growth going ahead.

IMF said that the country is well placed to cope with external shocks, although there are possible risks on the horizon, both external and domestic.

(With Agency inputs)