Published: Sat, October 19, 2019
Worldwide | By Lisa Hogan

International Monetary Fund cuts India's FY20 GDP growth forecast to 6.1% from 7%

International Monetary Fund cuts India's FY20 GDP growth forecast to 6.1% from 7%

The forecast global growth is 0.3 percentage point lower than the estimate International Monetary Fund released in April and the 3.4% growth for 2020 is a 0.2 percentage point downgrade.

The conclusions are of the report "Prospects for the development of the global economy: a global downturn, growth in trade barriers", published by the International Monetary Fund on Tuesday 15 October. World output is projected to increase to a modest 3.4% in 2020 - still lower by 0.2% than the April projection.

However, unlike the synchronised slowdown, this recovery is not broad based and is precarious, she notes.

"After 10 years of deficits and 28 years of continuous growth, we could really get a boost by dealing with some of the imbalances that have built up in the economy". The report called for defusing trade tensions, "reinvigorating" multilateral cooperation and "providing timely support to economic activity where needed".

While presenting the Global Economic Outlook, IMF chief economist Gita Gopinath, cited global trade as one of the main reasons for the lowest growth estimates in a decade. Both China and India are set to grow about 6% this year - with a slowing outlook for China next year and faster growth for India. Consumption, investment and exports were down.

Treasurer Josh Frydenberg says global conditions are contributing to Australia's struggling economy after the world economic outlook reduced Australia's growth forecast.

The Index of Industrial Production for India was 1.1%, month on month, in September - its lowest since February 2013.

The Worldwide Financial Fund warned that global financial dangers have risen as central banks scale back borrowing prices and that stronger oversight is required to ease threats to an already shaky enlargement.

Now, the big question is what India should do to reverse the slowdown.

That does indeed top Ms Gopinath's list.

Furthermore, she talked about, "On the fiscal aspect for India there enjoy been some present measures including the corporate tax sever".

"So now is the opportunity to look at a comprehensive reform to sustainably increase non-oil revenue".

The IMF suggested that India should use monetary policy and broad-based structural reforms to address cyclical weakness and strengthen confidence.

"A credible fiscal consolidation course is wished to lift down India's elevated public debt over the medium time frame".

The report also recommended "reforms to hiring and dismissal regulations" to help incentivize job creation and "land reforms encourage and expedite infrastructure development".

Growth is projected to pick up to 3.4 percent in 2020 (a 0.2 percentage point downward revision compared with April), reflecting primarily a projected improvement in economic performance in a number of emerging markets in Latin America, the Middle East, and emerging and developing Europe that are under macroeconomic strain. China's growth rate cut by 0.1 %, now settling at 6.1% for 2019.

Australia has so far been a big victor of the global slowdown sparked by the USA and China's trade war, with China spending on infrastructure and buying raw materials from Australia.

But she welcomed news of a truce in the US-China conflict, announced Friday after talks in Washington. The IMF considered a scenario under which multinational firms based in the US, euro zone, and Japan reshored enough production activity to pare back nominal imports by 10%.

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