New Delhi (NVI): In a scenario of global economic gloom, India remains a bright spot as the fastest growing economy major economy albeit with a lower than earlier projected growth rate of 6.1 per cent for the current fiscal, according International Monetary Fund’s World Economic Outlook released recently. The IMF cut the global economic growth forecast to 3 per cent.
Although the IMF effected an almost one per cent cut in the India forecast of 7 per cent as in July last citing weaker than expected outlook for domestic demand, New Delhi tied with Beijing as the fastest growing major economy. However, the IMF projected India’s economy to pick up and grow by 7 per cent in the 2020 fiscal year.
“In India, growth softened in 2019 as corporate and environmental regulatory uncertainty, together with concerns about the health of the nonbank financial sector, weighed on demand,” IMF said in its bi-annual World Economic Outlook.
The IMF joins a parade of multilateral institutions, rating firms and brokerages in cutting economic growth estimates for India, after Asia’s third-largest economy grew at its slowest pace in six years in the June quarter at 5%.
Last week, Moody’s Investors Service lowered its 2019-20 growth forecast for India to 5.8% from 6.2% earlier, saying the economy was experiencing a pronounced slowdown partly due to long-lasting factors. The rating agency’s projection is the most pessimistic so far.
The Indian economy is battling a severe demand slowdown and liquidity crunch that resulted in growth rate slowing to 5% in the three months ended June, while growth in private consumption expenditure slumped to an 18-quarter low of 3.1%. India’s industrial output contracted 1.1% in August, its worst show in 81 months, signalling a deepening of the economic downturn.
IMF chief economist Gita Gopinath in a statement said the global economy was in a synchronized slowdown and the Fund, once again, is downgrading growth for 2019 to 3%, its slowest pace since the global financial crisis.
“Growth continues to be weakened by rising trade barriers and increasing geopolitical tensions. We estimate that the US-China trade tensions will cumulatively reduce the level of global GDP by 0.8% by 2020. Growth is also being weighed down by country-specific factors in several emerging market economies, and structural forces—such as low productivity growth and aging demographics in advanced economies,” she added.
“This is a serious climbdown from 3.8% in 2017,” the WEO said of the 2019 global growth projection. World output is projected to increase to a modest 3.4% in 2020 — still lower by 0.2% than the April projection. Unlike the slowdown this recovery is expected to be “precarious” and “not broad based” as per the IMF. Emerging economies will show increased growth — from 3.9% in 2019 to 4.6% in 2020, while advanced economies will slow to 1.7% in 2019 and 2020. The report called for defusing trade tensions, “reinvigorating” multilateral cooperation and “providing timely support to economic activity where needed”.