International Monetary Fund cuts India growth forecast for 2018 by a notch to 7.3%

Marco Green
July 17, 2018

But "India's growth remains quite robust into the future; it is down but growing very strongly", said Maurice Obstfeld, the director of the IMF's Research Department.

The International Monetary Fund (IMF) cut India's growth projections for this fiscal year to 7.3 per cent and for the next to 7.5 per cent on Monday, although the country will still retain its top spot in the global growth league.

"Governments must also pay more attention to economic equity among citizens and especially protecting the poorest", Obstfeld said.

Last month, IMF Director Christine Lagarde sent out a clear warning on the grave economic consequences that retaliation from trading partners like Canada and the European Union could bring. "Amid rising tensions over worldwide trade, the broad global expansion that began roughly two years ago has plateaued and become less balanced", the IMF noted.

The IMF added in its latest World Economic Outlook update for this month: "The balance of risks has shifted further to the downside, including in the short term".

Growth projections have been revised down for the Eurozone, Japan, and the United Kingdom, Argentina and Brazil, while the outlook for some oil exporters has strengthened. France's GDP is expected to grow 1.8 percent and 1.7 percent.

The IMF, however, noted that even the U.S. growth could decelerate over the next few years, as the long cyclical recovery ran its course and the effects of temporary fiscal stimulus waned. Nigeria's growth is set to increase from 0.8% in 2017 to 2.1% in 2018 and 2.3% in 2019 on the back of an improved outlook for oil prices.

The rate of expansion appears to have peaked in some major economies and growth has become less synchronised. "These aggregate numbers, however, hide diverse changes in individual country assessments".

Though the International Monetary Fund had slightly revised downwards India's economic growth rate for FY19, its projections are now in sync with what other agencies - the World Bank and Asian Development Bank - have predicted.

The IMF warned that some large economies in Latin America, emerging Europe, and Asia will growth at rates below its April forecasts. Crude oil prices retreated below $71 a barrel on Monday ahead of a summit between USA president Donald Trump and Russian president Vladimir Putin. Both factors highlighted in the report apply to Pakistan.

"The greatest near-term threat to global growth", however, was the trade war among nations, which will have adverse effects on global confidence, asset prices, and investment, the report added.

Global current account imbalances would widen owing to a relatively high demand growth in the U.S., the report added.

Escalating and sustained trade conflicts following US tariff actions threaten to derail economic recovery and depress medium-term growth prospects, the International Monetary Fund warned on Monday.

Other reports by Click Lancashire

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