IMF cuts 2019 India growth estimate to 4.8%

The International Monetary Fund (IMF) has lowered growth estimate for India to 4.8 per cent for 2019, the largest reduction in growth projection for India so far, citing stress in the non-bank financial sector and weak rural income growth.

The reduction in IMF’s growth projection for India in its update on the World Economic Outlook comes ahead of the start of the World Economic Forum (WEF) annual summit.
IMF It expects growth in India to be around 5.8 per cent in 2020, which could rise to 6.5 per cent in 2021 with backing of suitable policy support.
Global growth is estimated at 2.9 per cent in 2019 and is projected to increase to 3.3 per cent in 2020 and inch up further to 3.4 per cent in 2021. The update of the WEO forecast represents a 0.1 percentage point reduction in growth rates for 2019 and 2020 and a 0.2 percentage point reduction in 2021 growth projection.
IMF said a more subdued growth forecast for India accounted for the lion’s share of the downward revisions.
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.
On the positive side, market sentiment has been boosted by tentative signs that manufacturing activity and global trade are bottoming out, a broad-based shift toward accommodative monetary policy, intermittent favorable news on US-China trade negotiations, and diminished fears of a no-deal Brexit, leading to some retreat from the risk-off environment that had set in at the time of the October WEO.
China’s growth has been revised upward by 0.2 per cent to 6 per cent for 2020, reflecting the trade deal with the United States, she added.
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.
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.
The country’s GDP slowed to a six-year low of 4.5 per cent in the second quarter of FY20, forcing the RBI to slash its growth forecast.
On the positive side, the revised WEO states that market sentiment has been boosted by tentative signs that manufacturing activity and global trade are bottoming out, a broad-based shift toward accommodative monetary policy, intermittent favorable news on US-China trade negotiations, and diminished fears of a no-deal Brexit, leading to some retreat from the risk-off environment that had set in at the time of the October WEO.
However, few signs of turning points are yet visible in global macroeconomic data, it added.