Economic slowdown in India is dragging global growth forecasts: IMF

The IMF also said it marked down growth forecasts for Chile due to social unrest and for Mexico, due to continuing poor investment

New Delhi: On Monday International Monetary Fund (IMF) cut back its 2020 global growth forecasts due to sharper-than-expected slowdowns in India and other emerging markets. But it also said a US-China trade deal was another sign that trade and manufacturing activity may soon go down.

The Fund said global growth would reach 3.3% in 2020, compared to 2.9% in 2019, which was the slowest pace since the financial crisis years ago. Approximately for both years were cut by 0.1 percentage point from forecasts made in October.

In 2021 growth will improve slightly to 3.4%, but that approximately, was cut by 0.2 percentage point from October, the Washington-based international crisis lender said.

The trimming reflects the IMF’s reassessment of economic prospects for a number of major emerging markets. Specifically, India, where domestic demand has slowed more sharply than expected amid a contraction of credit and stress in the non-bank sector.

The IMF also said it marked down growth forecasts for Chile due to social unrest and for Mexico, due to continuing poor investment.

The Fund said that due to the reduction of tensions between the United States and China, which had hampered GDP growth in 2019, had boosted market sentiment, amid “tentative” signs that trade and manufacturing were shaking out.

“Earlier the signs of stabilization could persist and eventually reinforce the link between still-resilient consumer spending and improved business spending,” the IMF said. The fund has mentioned uncertainty over tariffs and its negative effects on business investment as a huge factor in limiting growth.

“However, few signs of turning points yet to appear in global macroeconomic data,” the IMF added.

On Tuesday Congress leader P Chidambaram said that an attack on the International Monetary Fund (IMF) and it’s Chief Economist Gita Gopinath by government ministers was closely following the organization’s downward revision of the Indian economy’s growth.

“IMF Chief Economist Gita Gopinath was one of the first to criticize demonetization. I believe we must prepare ourselves for an attack by central government ministers on the IMF and Dr. Gita Gopinath,” Chidambaram tweeted.

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