The International Monetary Fund on Tuesday slashed India’s GDP growth projection for 2019 to 6.1 per cent, which is 1.2 per cent lower than its April projections.
This comes just two days after the World Bank revised India’s growth projection for the financial year 2019-20 from 7.5 per cent to 6 per cent.
The IMF had said in April that India will grow at 7.3 per cent in 2019. Just three months later, it projected a slower growth rate with a downward revision of 0.3 per cent.
As against the country’s real growth rate of 6.8 per cent in 2018, the IMF in its latest World Economic Outlook projected India’s growth rate at 6.1 per cent in 2019. However, it also noted that the Indian economy is expected to pick up the next year at 7.0 per cent.
The downward revision of 1.2 percentage points for 2019 and 0.5 percentage point for 2020 relative to its April predictions reflects a weaker-than-expected domestic demand, the IMF said. “Growth will be supported by the lagged effects of monetary policy easing, a reduction in corporate income tax rates, recent measures to address corporate and environmental regulatory uncertainty, and government programs to support rural consumption,” PTI quoted the IMF as saying.
China too is projected to grow at a slower rate in the next two years as compared to its growth in 2018. The country, whose GDP grew at 6.6 per cent in 2018, now has its growth projected at 6.1 per cent in 2019 and 5.8 per cent in 2020, the IMF said.
On Sunday, the World Bank in its latest edition of the South Asia Economic Focus said India’s growth rate is projected to fall to 6 per cent in 2019 from 6.9 per cent of 2018. However, the bank, in its latest edition of the South Asia Economic Focus, said the country was expected to gradually recover to 6.9 per cent in FY21 and 7.2 per cent in FY22 as it assumed that the monetary stance would remain accommodative, given benign price dynamics. The World Bank’s previous projection for India was 7.5 per cent, and this was announced in April.
“India’s economy decelerated further in the second quarter, held back by sector-specific weaknesses in the automobile sector and real estate as well as lingering uncertainty about the health of nonbank financial companies,” said the World Economic Outlook released ahead of the annual meeting of the IMF and the World Bank.
As remedial measures, the IMF, in its report, talked of using “monetary policy” and “broad-based structural reforms” to address “cyclical weakness and strengthen confidence”. A credible fiscal consolidation path is needed to bring down India’s elevated public debt over the medium term, it said.
(With Inputs from PTI)