The International Monetary Fund on Tuesday revised India’s growth forecast for 2019-’20 downward to 7%, from the 7.3% it had predicted in April.
“India’s economy is set to grow at 7% in 2019, picking up to 7.2% in 2020,” the IMF said in its July update to the World Economic Outlook. “The downward revision of 0.3 percentage point for both years reflects a weaker-than-expected outlook for domestic demand.”
The IMF also revised its growth projection for China and the world downward, to 6.2% and 3.2%. “In China, the negative effects of escalating tariffs and weakening external demand have added pressure to an economy already in the midst of a structural slowdown and needed regulatory strengthening to rein in high dependence on debt,” the fund said.
The IMF said Asia was likely to grow at 6.2% in 2019-’20, 0.1 percentage points lower than projected in the April outlook. The lowering of the projection reflects the impact of tariffs on trade and investment, the fund said.
“The revision for 2019 reflects negative surprises for growth in emerging market and developing economies that offset positive surprises in some advanced economies,” IMF chief economist Gita Gopinath said in a statement, according to Mint. “Global growth is sluggish and precarious, but it does not have to be this way because some of this is self-inflicted. Dynamism in the global economy is being weighed down by prolonged policy uncertainty as trade tensions remain heightened despite the recent US-China trade truce, technology tensions have erupted threatening global technology supply chains, and the prospects of a no-deal Brexit have increased.”
In May, the Reserve Bank of India lowered the repo rate, or the interest rate at which it lends to commercial banks, by 25 basis points to 5.75%, the lowest in nine years. The reverse repo rate, too, was lowered to 5.50% from 5.75%. The reverse repo rate is the rate at which the central bank borrows money from commercial banks.
The Ministry of Statistics and Programme Implementation had also revised the GDP growth for 2018-’19 downwards to 6.8% from 7.0% estimated earlier. India’s economy grew at just 5.8% in the last quarter of 2018-’19, the slowest pace of growth in 17 quarters.