IMF Chief calls India's slowdown 'temporary', projects improvement ahead

The Chief of International Monetary Fund (IMF), Kristalina Georgieva, on Friday, said that the slowdown in the Indian economy seems to be temporary and she expects the momentum to improve going ahead. During her address at the World Economic Forum (WEF), she further said that the world appears a better place in January 2020 compared to what it was when IMF announced its World Economic Outlook in October 2019. However, she said that a growth rate of 3.3% is not fantastic for the world economy. 

IMF Chief on emerging markets 

Talking about emerging markets, the IMF Chief Kristalina Georgieva said that they are also moving forward. She said a number of African countries are doing very well, but some other nations like Mexico are not. "We had a downgrade in one large market India, but we believe that's temporary. We expect the momentum to improve further going ahead. There are also some bright spots like Indonesia and Vietnam," she noted. 

Talking about the risks that the global economy could face in the future, she listed a few factors. These factors included weakness in long-term productivity growth and low inflation. "We are living in a more risk-prone world. It is only January and there have been events that are sparking risks for the global economy," she added. 

Read: IMF lowers India's growth estimate for 2020 by 1.2%, trims global forecast too

IMF Chief on “sluggish” global growth  

Speaking about the global growth, the IMF Chief Georgieva added, “It is still sluggish growth. We want fiscal policies to be more aggressive and we want structural reforms and more dynamism”. Furthermore, talking about the positive momentum in the global economy she said that the tensions pertaining to the first phase of the US-China trade deal are receding.  

Read: CPI data shows higher consumer inflation rates pegged at 7.35% in Dec against 5.54% in Nov

India’s growth estimate plummets 

This comes after, the International Monetary Fund (IMF) on Monday, January 21, lowered India’s growth estimate to 4.8% in 2019. The reason given for this was the stress in the non-bank financial sector and weak rural income growth. In a major setback for India, the projected estimate for 2020 was also lowered by 1.2%. Additionally, the IMF also trimmed its global forecast for 2020 as well.  

Read: Budget 2020: Swamy pinpoints economy abnormality, quips 'takes brains to fail like this'

Earlier, IMF had forecast a growth projected at 7% for India in 2020, they later brought the estimate down in October 2019. However, the revision of IMF estimates, in January 2020, came as a big blow to India because it witnessed the sharpest decline as compared to any other emerging market to 5.8%. The IMF cited the domestic credit crunch and the performance of NBF sectors, rural economy as the main reasons for India’s downfall.  

IMF’s India forecast in October 2019 for the year 2021 was pegged at 7.4%, however, the IMF said that after 2019 and 2020’s downfall, the monetary and fiscal stimulus in India’s economy can surge India’s growth rate to 6.5% by 2021. IMF’s 2020 forecast for global growth was also cutback owing to several reasons, including India and other emerging markets’ performance. However, the main reason for the trim in the global forecast was the US-China trade deal.  

Read: Indian Economy registers 4.5% GDP growth rate in Q2; down from 5% in Q1; Full release here