The International Monetary Fund (IMF) Tuesday predicted a slower growth rate for India in 2019 and 2020 saying its GDP will now grow at the rate of 7 per cent and 7.2 per cent respectively reflecting a weaker-than expected outlook for domestic demand.
“India’s economy is set to grow at 7.0 per cent in 2019, picking up to 7.2 per cent in 2020. The downward revision of 0.3 percentage point for both years reflects a weaker-than expected outlook for domestic demand,” the International Monetary Fund (IMF) said in its World Economic Update.
However, it also said that India will still be the fastest-growing major economy of the world and much ahead of China, adding that this is the downward revision of 0.3 percentage point for both years.
The IMF further said that in China, the negative effects of escalating tariffs and weakening external demand have added pressure to an economy already in the midst of a structural slowdown and needed regulatory strengthening to rein in high dependence on debt. With policy stimulus expected to support activity in the face of the adverse external shock, growth is forecast at 6.2 per cent in 2019 and 6.0 per cent in 2020 — 0.1 percentage point lower each year relative to the April World Economic Outlook (WEO) projection, the IMF said.
Releasing the report in Chile’s capital Santiago, IMF’s Indian-origin Chief Economist Gita Gopinath said the IMF is revising downward its projection for global growth to 3.2 per cent in 2019 and 3.5 per cent in 2020, PTI reported.
“While this is a modest revision of 0.1 percentage points for both years relative to our projections in April, it comes on top of previous significant downward revisions. The revision for 2019 reflects negative surprises for growth in emerging market and developing economies that offset positive surprises in some advanced economies,” PTI quoted Gopinath as saying.
Gopinath noted that close to 70 per cent of the growth relies on an improvement in the growth performance in stressed emerging market and developing economies and is therefore subject to high uncertainty.
The IMF’s Chief Economist added that the combined effect of tariffs imposed last year and potential tariffs envisaged in May between the United States and China could reduce the level of global GDP in 2020 by 0.5 per cent. Stating that the global economy is a delicate juncture, Gopinath said it is essential that tariffs are not used to target bilateral trade balances or as a general-purpose tool to tackle international disagreements.
“To help resolve conflicts, the rules-based multilateral trading system should be strengthened and modernised to encompass areas such as digital services, subsidies and technology transfer,” she said.
(With PTI inputs)