The International Monetary Fund (IMF) has projected India’s GDP growth rate to be 4.8% in FY 2019-20. To this, former Finance Minister and Congress leader P Chidambaram said that now IMF and Geeta Gopinath should be ready to face the attack of the Modi government. Chidambaram also said, “The IMF had to make a lot of effort to give a 4.8% growth rate. I wouldn’t be surprised if the growth rate is below this. ”
However, Geeta Gopinath also said that due to the cut in the corporate tax rate, next year, India’s economy may show a positive impact.
Chidambaram tweeted
मैंने ट्वीट किया है अंतरराष्ट्रीय मुद्रा कोष से रियलिटी चेक। 2019-20 में वृद्धि 5% से कम 4.8% होगी।
यहां तक कि 4.8% भी कुछ विंडो ड्रेसिंग के बाद है।— P. Chidambaram (@PChidambaram_IN) January 21, 2020
The International Monetary Fund (IMF) on Monday slashed India’s growth forecast by 1.3 percentage points to 4.8% for 2019-20, prompting the agency to also trim its global growth estimates as a result.
IMF chief economist Gita Gopinath said growth in India slowed sharply “owing to stress in the non-bank financial sector and weak rural income growth”.
“We project global growth to increase modestly from 2.9% in 2019 to 3.3% in 2020 and 3.4% in 2021. The slight downward revision of 0.1 percentage point for 2019 and 2020, and 0.2 percentage point for 2021. However, owed largely to downward revisions for India,” she said in the IMF’s World Economic Outlook (WEO) update.
The International Monetary Fund slashed India’s growth forecast by 1.3 percentage points to 4.8%
While the Indian government’s statistics department and the Reserve Bank of India (IMF) have estimated growth in 2019-20 at 5%, rating agency Moody’s Investors Service has projected growth at 4.9% for the fiscal.
The IMF report, however, projected India’s growth to revive in 2020-21 to 5.8%. Also, 30 basis points below its October estimate. However, “supported by the monetary and fiscal stimulus as well as subdued oil prices”.
Finance minister Nirmala Sitharaman is scheduled to present her second budget on 1 February. However, is expected to increase infrastructure spending and boost rural expenditure to revive growth. However, which has slowed to a six-and-half-year low at 4.5% in the September quarter.
IMF in its Article IV consultation report on India released last month said that the Indian government should avoid a fiscal stimulus to boost the economy and, instead, opt for easier monetary policy. “In the near-term, given the cyclical weakness of the economy, monetary policy should maintain an easing bias, at least until the projected recovery takes hold. Fiscal stimulus avoided, given (that the) fiscal space at risk. Also, revenue losses from the recent corporate income tax rate cut offset. In the event of a more severe economic slowdown than currently envisaged. Also, any fiscal stimulus should be temporary, focusing on measures to boost near-term growth. However, such as immediate investment expensing or public infrastructure spending,” IMF had said.
However, retail inflation has picked up since then and the RBI has paused its monetary easing cycle. Retail inflation touched a five-and-a-half-year high of 7.35% in December, breaching the central bank’s tolerance limit of 6%. This may constrain RBI from not only further monetary easing in its policy review on 6 February. However, but may also force it to rethink its accommodative policy stance.