IMF chief calls India’s growth slowdown temporary, expects improvement

Chief economist Gita Gopinath had earlier said India owed largely to the cut in global growth forecasts

Kristalina Georgieva
IMF chief Kristalina Georgieva speaks at the World Economic Forum at Davos | Photo: Twitter/IMF

Kristalina Georgieva, chief of the International Monetary Fund (IMF), on Friday (January 24) said the slowdown in India’s growth appears to be temporary. This comes days after IMF chief economist Gita Gopinath said India was the biggest contributor to the lowering of global growth forecasts.

Speaking at the World Economic Forum 2020, Georgieva said world appears a better place in January 2020 compared to what it was when IMF announced its World Economic Outlook in October 2019. She said the factors driving this positive momentum include receding trade tension after the US-China first phase trade deal and synchronised tax cuts, among others.

She, however, said a growth rate of 3.3 per cent is not fantastic for the world economy. “It is still sluggish growth. We want fiscal policies to be more aggressive and we want structural reforms and more dynamism,” the IMF managing director said. On emerging markets, she said they are also moving forward.

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“We had a downgrade in one large market, India, but we believe that’s temporary. We expect momentum to improve further going ahead. There are also some bright spots like Indonesia and Vietnam,” she noted. She further said a number of African countries are doing very well, but some other nations like Mexico are not.

On risks ahead for the global economy, the IMF chief listed factors like 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.

On January 20, the IMF had lowered the growth outlook for the global economy, saying the slight downward revision of 0.1% for two years and 0.2% for the year after that in the global growth was largely due to downward revision for India estimates.

Gopinath had then said the slight downward revision of 0.1% for 2019 and 2020, and 0.2% for 2021, owed largely to downward revisions for India. She said the biggest contributor to the revision is India, where growth slowed sharply owing to stress in the nonbank financial sector and weak rural income growth.

(With inputs from agencies)

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