Even as prospects for global economic growth remain clouded, the International Monetary Fund (IMF) has news that cheers for India. The multilateral agency on Monday retained its growth projection for the country at 7.5 per cent for 2019-20 and said it is likely to accelerate to 7.7 per cent in 2020-21.
This comes on a day when China announced that its GDP recorded its lowest growth rate in 28 years at 6.6 per cent (for 2018). This is lower than the IMF’s estimate of 6.6 per cent in 2018 and 6.2 per cent in 2019 and 2020.
With the latest outlook, India will remain the fastest-growing economy in the world, at least for the next two years.
The IMF report says that India’s economy is poised to pick up in 2019, benefiting from low oil prices and a slower pace of monetary tightening than previously expected as inflation pressures ease.
The latest growth projection by the IMF is a tad higher than the Central Statistics Office’s (CSO) estimate of 7.2 per cent, but lower than the RBI’s estimate of 7.4 per cent. But it is in line with the World Bank’s estimate of 7.3 per cent.
The IMF's latest update of the World Economic Outlook (WEO), however, projected global growth at 3.5 per cent in 2019 and 3.6 per cent in 2020 — 0.2 and 0.1 percentage points lower than last October’s projections.
“The downward revisions are modest; however, we believe the risks to more significant downward corrections are rising. While the financial markets in advanced economies appeared to be decoupled from trade tensions for much of 2018, the two have become intertwined more recently, tightening financial conditions and escalating the risks to global growth,” Gita Gopinath, Chief Economist of IMF, said in her blog on the outlook.
She also suggested policy priorities to mitigate global risks. She said that policy-makers need to act now to reverse headwinds to growth and prepare for the next downturn. Countries should quickly resolve their trade disagreements and the resulting policy uncertainties, rather than raising more harmful barriers and destabilising an already slowing global economy.