India to grow over twice as fast as world average, says IMF delivering 7.0% and 7.2% forecast

The International Monetary Fund has forecast India's economy to grow at 7.0% in 2019 and then at 7.2% in 2022, in a projection that vastly outpaces the corresponding projection for global growth which stands at 3.2% and 3.5% respectively.

The IMF's projection comes just weeks after the annual Economic Survey projected that India's GDP growth for the ongoing fiscal will rise to 7.0% versus 6.8% in the fiscal that just ended, meaning that India would remain the fastest-growing major economy in the world and much ahead of China, the Washington-based global financial institution said.

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In China, the negative effects of escalating tariffs and weakening external demand have added pressure to an economy already in the midst of a structural slowdown and needed regulatory strengthening to rein in high dependence on debt, it said.

With policy stimulus expected to support activity in the face of the adverse external shock, growth is forecast at 6.2 percent in 2019 and 6.0 percent in 2020 -- 0.1 percentage point lower each year relative to the April World Economic Outlook (WEO) projection, the IMF said.

Releasing the IMF's April World Economic Outlook (WEO) report in Chile's capital Santiago, IMF's Indian-origin Chief Economist Gita Gopinath said the IMF is revising downward its projection for global growth to 3.2 percent in 2019 and 3.5 percent in 2020.

"While this is a modest revision of 0.1 percentage points for both years relative to our projections in April, it comes on top of previous significant downward revisions. The revision for 2019 reflects negative surprises for growth in emerging market and developing economies that offset positive surprises in some advanced economies," she said.

Noting that growth is projected to improve between 2019 and 2020, she said, however, close to 70 percent of the increase relies on an improvement in the growth performance in stressed emerging market and developing economies and is therefore subject to high uncertainty.

Global growth, Gopinath said, is sluggish and precarious, but it does not have to be this way because some of this is self-inflicted.

Dynamism in the global economy is being weighed down by prolonged policy uncertainty as trade tensions remain heightened despite the recent US-China trade truce, technology tensions have erupted threatening global technology supply chains, and the prospects of a no-deal Brexit have increased, she said.

Gopinath said a major downside risk to the outlook remains an escalation of trade and technology tensions that can significantly disrupt global supply chains.

The combined effect of tariffs imposed last year and potential tariffs envisaged in May between the United States and China could reduce the level of global GDP in 2020 by 0.5 percent, she said.

With global growth subdued and downside risks dominating the outlook, the global economy remains at a delicate juncture, she said.

It is therefore essential that tariffs are not used to target bilateral trade balances or as a general-purpose tool to tackle international disagreements, Gopinath said.

"To help resolve conflicts, the rules-based multilateral trading system should be strengthened and modernised to encompass areas such as digital services, subsidies and technology transfer," the IMF's Chief Economist added.