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IMF cuts India growth forecast to 4.8%, flags stress in non-bank financial sector

IMF chief economist Gita Gopinath cites decline in rural demand growth and an overall credit sluggishness for lowering of India forecasts.

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Davos: The IMF Monday lowered India’s economic growth estimate for the current fiscal to 4.8 per cent and listed the country’s much lower-than-expected GDP numbers as the single biggest drag on its global growth forecast for two years.

In October, the International Monetary Fund (IMF) had pegged India economic growth at 6.1 per cent for 2019.

Listing decline in rural demand growth and an overall credit sluggishness for lowering of India forecasts, IMF Chief Economist Gita Gopinath however said the growth momentum should improve next year due to factors like positive impact of corporate tax rate reduction.

“Global growth, estimated at 2.9 per cent in 2019, is projected to increase to 3.3 per cent in 2020 and inch up further to 3.4 per cent in 2021,” the IMF said while releasing an update to its World Economic Outlook (WEO).

Compared to the October WEO forecast, the estimate for 2019 and the projection for 2020 represent 0.1 percentage point reductions for each year while that for 2021 is 0.2 percentage point lower.

“A more subdued growth forecast for India… accounts for the lion’s share of the downward revisions,” the IMF said ahead of the start of the World Economic Forum (WEF) annual summit here.

India-born IMF Chief Economist Gita Gopinath said growth in India slowed sharply owing to stress in the non-bank financial sector and weak rural income growth.

The country’s growth is estimated at 4.8 per cent in 2019, projected to improve to 5.8 per cent in 2020 and 6.5 percent in 2021 (1.2 and 0.9 percentage point lower than in the October WEO), supported by monetary and fiscal stimulus as well as subdued oil prices, it added.

2019 refers to fiscal year 2019-20.

India’s economy grew just 4.5 per cent in July-September 2019 period — the weakest pace in nearly six years. The Indian government has been taking various measures to bolster growth.

For the emerging market and developing economy group, the IMF said growth is expected to increase to 4.4 per cent in 2020 and 4.6 per cent in 2021 (0.2 percentage point lower for both years than in the October WEO) from an estimated 3.7 per cent in 2019.

“The growth profile for the group reflects a combination of projected recovery from deep downturns for stressed and underperforming emerging market economies and an ongoing structural slowdown in China,” it noted.

Gopinath also said the pickup in global growth for 2020 remains highly uncertain as it relies on improved growth outcomes for stressed economies like Argentina, Iran and Turkey, and for underperforming emerging and developing economies such as Brazil, India and Mexico.

Further, the IMF said the balance of risks to the global outlook remains on the downside, but less skewed toward adverse outcomes than in the October WEO.

Also read: IMF trims global economic outlook, but tones down risk warnings


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  1. News reports now share with readers the latest forecast of India’s GDP for 2019 by IMF in January 2020. For some months past , India’s GDP growth forecast for 2019-20 has been lowered by different economic related global agencies. It may be alright to say that it is not going beyond 5 percent. And that is , in fact , a worrisome situation. But then we are not alone. Economic slowdown is a global phenomenon in 2019. And so are natural and man-made disasters world-wide. In this context , it may be apt to mention this Vedic astrology writer’s following two articles , alerting the nation for more care and appropriate strategy :- (1). “ The year 2019 astrologically for India” – published as early as on 7 October 2018 at (2). “ World trends in mid-April to August 2019” – brought out to public domain widely in March 2019 followed on 5 April 2019. The predictive alert of this writer was that a period of four and a half months from mid-April to August 2019 may call for closer attention to strategize the economy in global perspective including India. Later , in May 2019 , it was added that the worrisome circumstances looked to be reaching as far as mid-October 2019. And while alerting India on economic aspect as well through “ Predictions for year 2020” – published on 10 October 2019 at , the prediction is that the ongoing slowdown is likely to get arrested or checked during second half of 2020 from July to September.

  2. In the difficult years after the GFC, the IMF often lauded India for being a bright spot against a darkening background. So for it to now say that India is a “ drag “ on the global economy is a somber change of mood. May the Budget mark a decisive shift in the government’s mentorship of the economy.

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