India’s growth premium to hit 0.1 per cent mark: IMF
NEW DELH: India’s growth premium over the emerging economies (EMs) is likely to touch a seven-year low mark in 2019-20 (FY20), an 18-year low, according to the data released by the International Monetary Fund (IMF). It will drop to 0.1 per cent, expected to be the lowest since 2012-13.
On the other hand, the gross domestic product (GDP) in India is expected to grow by 5 per cent in FY20, against 3.9 per cent growth in EMs in the calendar year (CY) 2019. The growth rate of India is lowest compared to the other growing economies like Europe, United States, Japan.
The economic analysts have repeatedly raised the issues related to slower demand growth in India and inflation as they express worries over falling Indian economy. They are claiming it can affect the capital inflows which plays a crucial role in sustaining the country’s economy.
The International Monetary Fund (IMF) on Monday lowered growth estimate for India to 4.8 per cent for financial year 2019-20, citing stress in the non-bank financial sector and weak rural income growth as the major factors for the downward revision.
While providing an update on the global economy ahead of the start of the World Economic Forum (WEF) annual summit, the IMF cut its India growth forecast to 4.8 per cent for 2019. It expects growth to be 5.8 per cent in 2020 and rise to 6.5 per cent in 2021.
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. 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.
Ms 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.
IMF Forecasts India’s GDP To Grow At 7.5 Per Cent In 2019-20IMF Forecasts India’s GDP To Grow At 7.5 Per Cent In 2019-20
In India, the IMF said domestic demand has slowed more sharply than expected amid stress in the non-bank financial sector and a decline in credit growth.
The slowdown in India will have an effect on the global growth story and it has pushed down the global forecast by “0.1 per cent”, Gita Gopinath, the Chief Economist of the IMF told a Indian TV Channel in an exclusive interview today.
The IMF has slashed India’s growth forecast to 4.8 per cent, a cut of 1.3 per cent in just three months. In its World Economic Outlook released in Davos, Switzerland, the IMF has said “a more subdued growth forecast for India accounts for the lion’s share of the downward revisions.”
“Given the size of the Indian economy in the global GDP right now, if you have a significant downward revision for India, then it does have an impact on global growth so we revised global growth down for 2019 by 0.1% and the vast majority of that comes from the downgrade for India,” Ms Gopinath told at Davos.
The biggest issue, Ms Gopinath said, is in the financial space. “If you look at the financial sectors, you have stress there, particularly with non-bank financial corporations. We have seen a tremendous weakness in the credit growth, business sentiment as there appears to be quite sharply an increase in risk aversion in lending in the markets. Alongside that, there has been weakness in rural income growth.”
There is an expectation, however, that there would be an uptick in GDP growth by 2021 to 6.5 per cent, “supported by monetary and fiscal stimulus as well as subdued oil prices.”
(With Agency Inputs ).