IMF cuts India`s growth rate to 4.8% for current financial year

Washington DC: The International Monetary Fund (IMF) has slashed India`s growth rate to 4.8 per cent for the current financial year, which is expected to rise to 5.8 per cent in 2020. In October, the IMF had estimated the growth rate at 6.1 per cent.

"IMF`s World Economic Outlook report estimates India`s growth at 4.8 per cent in 2019," said the global money lender in a statement. It projected the country`s growth to improve to 5.8 per cent in 2020 and 6.5 per cent in 2021.

The IMF attributed the slash in estimate to the slowdown in demand in the domestic market and stress in the nonbank financial sector."The growth markdown largely reflects a downward revision to India`s projection, where domestic demand has slowed more sharply than expected amid stress in the nonbank financial sector and a decline in credit growth," said the IMF.

It further said: "The downward revision primarily reflects negative surprises to economic activity in a few emerging market economies, notably India, which led to a reassessment of growth prospects over the next two years."

Growth slowed sharply owing to stress in NBFC: IMF

The downward revision primarily reflects negative surprises to economic activity in a few emerging market economies, notably India, which led to a reassessment of growth prospects over the next two years, said Gita Gopinath, Chief Economist, International Monetary Fund (IMF), in Davos, Switzerland, on Monday.

Gopinath, while updating the World Economic Outlook at the World Economic Forum (WEF), said the growth in India slowed sharply owing to stress in the non-banking financial sector and weak rural income growth."The downward revision primarily reflects negative surprises to economic activity in a few emerging market economies, notably India, which led to a reassessment of growth prospects over the next two years. In a few cases, this reassessment also reflects the impact of increased social unrest," she said at a press conference in Davos. 

India`s growth is estimated at 4.8 per cent in 2019, projected to improve to 5.8 per cent in 2020 and 6.5 per cent in 2021, supported by the monetary and fiscal stimulus as well as subdued oil prices, said the IMF.

Talking about the global growth, which has shown tentative signs of stabilisation since last October, Gopinath said: "In October, we described the world economy as a synchronised slowdown with escalating downside risks that could further derail growth."

"Since then some risks have partially receded when the economic outlook was announced with the announcement of US-China Phase 1 deal and a lower likelihood of a no-deal Brexit," she said.

The Chief Economist of IMF also stressed that monetary policies have continued to support growth and buoyant financial conditions. "With these developments, there are now tentative sides that global growth may be stabilising at subdued levels," she added.

Through this updated world economic outlook, Washington-based global money lender has projected a modest recovery for the global growth to increase from 2.9 per cent in 2019 to 3.3 per cent in 2020 and 3.4 per cent in 2021.

Gopinath said that the year 2019 saw shrinkage in the auto sector. However, towards the end of 2019, there were some signs of stabilisation as the auto sector is still undergoing a transformation.The IMF has also predicted China`s growth rate to inch down from an estimated 6.1 per cent in 2019 to 6 per cent in 2020 and 5.8 per cent in 2021.

IMF Managing Director Kristalina Georgieva, while speaking on the occasion, said the reality is global growth remains sluggish."Since the very first week of the new year, we have seen geopolitical tensions in the Middle East as well as climate shocks in Australia. 

There have been 71 rate cuts by 49 Central Banks making it to be one of the most synchronised monetised easing to cease the global financial crisis," Georgieva noted.