India retains its rank as the world’s fastest-growing major economy, tying with China, with a projected growth rate of 6.1 per cent for the current fiscal year said an IMF release despite an almost one per cent cut in the forecast. However, the IMF’s World Economic Outlook (WEO) projected India’s economy to pick up and grow by 7 per cent in the 2020 fiscal year. The WEO cut India’s growth rate by 0.9 per cent from the 7 per cent made in July and by 1.2 percent from the 7.3 per cent in April.
The world economy is projected to grow only 3 per cent this year and 3.4 per cent next year amid a “synchronised slowdown”, according to the WEO.
IMF’s projected growth rate of 6.1 per cent for 2019-20 is consistent with the Indian Monetary Policy Committee’s forecast.
WEO projected China’s economic growth to slow down to 5.8 per cent next year. In the Euro area, growth is projected to be only 1.2 percent this year and 1.4 next year, with the German economy expected to grow by a dismal 0.5 per cent this year.
United States is expected to slightly better with a 2.1 per cent growth projected for this year and 2.4 per cent for the next. Gopinath blamed the global slowdown on rising trade barriers, uncertainty surrounding trade and geopolitics, and structural factors, such as low productivity growth and an aging population in developed countries.
India’s future “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”, it added.
In the medium term, the IMF expects India’s growth to stabilise at about 7.3 per cent over the medium term, based on continued implementation of structural reforms. The IMF suggested that India should use monetary policy and broad-based structural reforms to address cyclical weakness and strengthen confidence.