6.1% Growth Rate Shares Top Rank Among Major Economies
United Nations: Although India’s economic growth rate has been cut to 6.1 per cent for the current fiscal year, it still remains “very strong” by global standards, International Monetary Fund’s (IMF) Deputy Research Director Gian Maria Milesi-Ferreti said on Tuesday.
He and IMF Chief Economist Gita Gopinath made optimistic projections for India’s economy to pick up next year while addressing a news conference for the release of the IMF’s World Economic Outlook (WEO) report in Washington.
According to the report, India and China with their projected growth rate of 6.1 percent for the current year share the top rank among major economies.
India’s “overall growth remains very strong by the standards of the world economy even though it is lower than the very high standards to which we were accustomed to in looking at India,” Milesi-Ferreti said, adding that that a “growth rate above six per cent is still notable and extremely important in a country that has such a large population”.
This growth rate is in contrast to the global economy which, Gopinath said, is “in a synchronised slowdown, with growth for 2019 downgraded again – to 3 percent – its slowest pace since the global financial crisis”.
The IMF has forecast “a further pick up next year” for India’s economy helped by tax cuts on the corporate sector, he said. “In our projections, we have that India would recover to seven per cent growth in 2020,” Gopinath said. In India “there has been a negative impact on growth that has come from financial vulnerabilities in non-bank financial sector and the impact that has had on consumer borrowing, borrowing by small and medium enterprises”, she said.
The hike in growth projection for next year is based “on the premises that these particular bottlenecks will clear up,” Gopinath said. “Appropriate steps have been taken” to deal with these problems, while “still a lot more that needs to be done including cleaning up of the balance sheets of the major commercial banks.”
Also, she said, “On the fiscal side for India there have been some recent measures including the corporate tax cut”.
While India has not yet said how it would offset the revenue shortfall from this measure, the revenue projections look optimistic, she said. “It is important for India to keep the fiscal deficit in check,” she added.
The WEO has cut India’s growth rate by 0.9 per cent to 6.1 percent from the 7 per cent made in July and by 1.2 percent from the 7.3 per cent in April.
IMF’s projected growth rate of 6.1 per cent for 2019-20 is consistent with the Indian Monetary Policy Committee’s forecast.
Explaining the cut in growth projection for India, the WEO said: “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.”
It added that “corporate and environmental regulatory uncertainty” were other factors that weighed on demand.