The International Monetary Fund (IMF) on January 20, revised India’s growth projection by 130 basis points, downgrading it to 4.8 per cent for 2019-20.
In its World Economic Outlook update, the IMF chief economist Gita Gopinath said that growth in India decelerated sharply ‘owing to stress in the non-banking financial sector and weak rural income growth’.
‘We project global growth to increase modestly from 2.9 per cent in 2019 to 3.3 per cent in 2020 and 3.4 per cent in 2021. The slight downward revision of 0.1 per cent for 2019 and 2020, and 0.2 per cent for 2021, is owed largely to downward revisions for India,’ she added.
We project global growth to increase modestly from 2.9% in 2019 to 3.3% in 2020 and 3.4% in 2021 according to our latest update to the World Economic Outlook #WEO. See the latest projections. https://t.co/WBs8djIaIZ pic.twitter.com/telpCDNRHk
â IMF (@IMFNews) January 21, 2020
India’s economic growth had downgraded to a six-and-a-half-year low of 4.5 per cent in the September quarter.
The IMF, in its Article IV consultation report on India, released last month, said that the Indian government should avoid a fiscal stimulus to boost the sagging economy and, instead, opt for a more straightforward financial policy.
‘In the near-term, given the cyclical weakness of the economy, monetary policy should maintain an easing bias, at least until the projected recovery takes hold. Fiscal stimulus should be avoided, given (that the) fiscal space (is) at risk and revenue losses from the recent corporate income tax rate cut should be offset. In the event of a more severe economic slowdown than currently envisaged, any fiscal stimulus should be temporary, focusing on measures to boost near-term growth, such as direct investment expensing or public infrastructure spending,’ IMF had said.
The statistics office has calculated that the economy might pick up in the second half of the financial year, to record a 5 per cent overall growth in 2019-20.
IMF has also revised China’s growth upward by 0.2 per cent to 6 per cent for 2020, reflecting the trade deal with the United States.
‘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 underperforming emerging and developing economies such as Brazil, India, and Mexico,’ IMF said.
‘India Is Over 80% Of The Reason For Downgrade In Global Growth’: Gita Gopinath
Gita Gopinath, on her recent visit to India, had indicated that the country’s growth projection will be revised ‘sharply downward’.
While speaking to India Today News Director Rahul Kanwal, at the ongoing 50th annual meeting of the World Economic Forum (WEF) in Davos, Gita Gopinath said that India was responsible for the downgrade in global growth.
When asked the extent to which the economic slowdown in India had impacted global forecasts, Gita Gopinath said, ‘Simple calculation says it would be over 80 per cent.’
According to the economist, the biggest challenge before the government is to restart the growth of the economy without furthering the non-performing assets (NPAs) problem.
She also added that India also needs strong governance reforms.
However, while commenting on the road to recovery, Gopinath said, ‘We see India recovering. There is a significant recovery coming in the next fiscal year. There is a fair amount of monetary stimulus in the system, corporate tax cuts are also there — these should help with recovery in growth.’
#IndiaTodayAtDavos20Global growth down at 2.9%, says IMF Chief Economist Gita Gopinath as she speaks #exclusively to @rahulkanwal#Newstrack with @rahulkanwal LIVE https://t.co/4fqxBVUizL pic.twitter.com/tligoqo36W
â India Today (@IndiaToday) January 20, 2020
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