Despite the second cut in projections this year by the International Monetary Fund (IMF)India remains the world’s top-performing major economy with a growth rate of 7 percent for the current fiscal year. Some more improvements are also expected in the near term according to Chief Economist Gopinath.
According to the projection of the World Economic Outlook (WEO) Update released on Tuesday in Santiago, Chile, by Gopinath, the Indian economy’s growth rate to increase to 7.2 percent next financial year. For both the years, the cut in growth projection was 0.3 percent from that made in April and it was attributed to “a weaker-than-expected outlook for domestic demand”.
The earlier growth projection has also been cut by WEO by 0.2 percent for the current and next financial years. The 7 percent growth rate for this year is higher than the 6.8 percent last year.
India’s growth rate is more than double as compared to the growth projection for the global economy, which according to the IMF would be 3.2 percent for this year and 3.5 percent for the next year.
The IMF growth projection i.e. 7 percent is exactly the same as made by the UN in May for this year and is slightly higher than the UN’s 7.1 percent for the next year.
Gopinath told reporters, “The IMF expected to see some improvement in investment and consumption in India in the near term and that along with a more accommodative monetary policy and fiscal policy of the Indian government should remove some of the downside risks”.
While explaining the reason for the cuts, she said, “There was a weakness that was fairly broad-based in investment and in consumption in the first quarter of this year”.
She further added, “Some of this was a reflection of the run-up to the elections and the uncertainties associated with that. There was also some tightening of financial conditions, especially for small and medium enterprises”.
For this year, China’s growth rate is projected by the Update to be 6.2 percent for this year and to go down to 6 percent next year. For both years, the IMF cut the April projections by 0.1 percent.
The IMF has credited the slow growth of the global economy to the US increasing tariffs on certain Chinese imports and China retaliating. It further added, “Global technology supply chains were threatened by the prospect of US sanctions, Brexit-related uncertainty continued, and rising geopolitical tensions roiled energy prices. But additional escalation was averted following the June G20 summit.”