The sharper than expected slowdown in the Indian economy and other emerging economies pulled down the global growth forecasts for 2020, January’s World Economic Outlook update by International Monetary Fund (IMF) said. The global growth is expected to reach 3.3 per cent in 2020, compared to 2.9 per cent in 2019, the slowest pace since the financial crisis a decade ago. The Washington-based international crisis lender revised downward India’s GDP growth projection to 4.8 percent for FY20 and to 5.8 percent for FY21. “(India’s) domestic demand has slowed more sharply than expected amid stress in the non-bank financial sector and a decline in credit growth,” the IMF report said. The biggest contributor to the revision is India, owing to stress in the non-bank financial sector and weak rural income growth, IMF Chief Economist Gita Gopinath said.
The other emerging economies including Chile, which has been hit by social unrest also saw a growth downgrade. Mexico is expected to grow just 1 per cent in 2020, down from 1.3 per cent forecast in October. “The downward revision primarily reflects negative surprises to economic activity in a few emerging market economies, notably India, which led to a reassessment of growth prospects over the next two years,” IMF said in its report.
The Indian economy is seeing a slowdown for some months now on account of both global and domestic factors. According to the first advance estimates released by the government, the economy is expected to grow at just 5 per cent in FY20. The government has announced a slew of measures in the past few months ranging from bank recapitalisation to removing the tax on the super-rich. The upcoming budget, to be presented by finance minister Nirmala Sitharaman on February 1, 2020, is expected to be watched closely for the announcement of fresh measures to revive the slowing economy.