IMF has cut India's growth estimate by a third in about a year⁠— and the slowdown is weighing the world economy

  • The International Monetary Fund has cut India's GDP growth estimate to a mere 4.8% in its latest revision.
  • This is a sharp fall from the 7.5% growth estimate it had for India's economy the same time last year.
  • The IMF also cited the economic slowdown in India for the sharp reduction in the growth estimate for the global economy.
The International Monetary Fund now expects India to grow at a measly 4.8%, a long way down from the estimated 7.5% GDP growth for the then 'world's fastest-growing' economy. As reported by Business Insider earlier, the Indian economy is slowing down so fast that even experts can't keep up.

"Domestic demand has slowed more sharply than expected amid stress in the non-bank financial sector and a decline in credit growth," the IMF said while cutting down the growth estimates for India.

The government may have been pursuing a devious strategy of deflecting public concerns about job and income prospects (and the recent inflation spike) with its controversial ‘citizens’ legislation, a recent CLSA report said.

In the next fiscal year i.e. financial year ending March 2021, India's growth rate is expected to increase by 1% to 5.8%. However, IMF projects India to be the second fastest-growing major economy this year and the next, behind China's 6.1% this year and 6.4% next year.

Not just that, IMF's World Economic Outlook (WEO) also blamed India's economic slowdown for a "lion's share" of the 0.1% cut in the global economic growth projections for last year to 2.9% and to 3.3% for the current year from those made in October. "A more subdued growth forecast for India accounts for the lion's share of the downward revisions," the IMF said.



The one from IMF is also the lowest growth projection among international organisations. The World Bank estimated India's growth rate to be 5% while the UN put it at 5.7%. "Trade policy uncertainty, geopolitical tensions, and idiosyncratic stress in key emerging market economies continued to weigh on global economic activity, especially manufacturing and trade, in the second half of 2019," the IMF added as reasons.

Portrait of Iranian Revolutionary Guard Gen. Qassem Soleimani, who was killed in Iraq in a U.S. drone attack on Friday, is shown on a screen in northern Tehran, Iran, Thursday, Jan. 9, 2020. Many Iranians say they are relieved that neither their country nor the United States appear primed right now for a more direct military confrontation that could lead to war.Photo/Vahid Salemi)

It added, "Intensifying social unrest in several countries posed new challenges, as did weather-related disasters." Despite these, IMF said, "Some indications emerged toward year-end that global growth maybe bottoming out."

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At the same time it cautioned, "Downside risks, however, remain prominent, including rising geopolitical tensions, notably between the United States and Iran, intensifying social unrest, further worsening of relations between the United States and its trading partners, and deepening economic frictions between other countries."

With inputs from IANS

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