IMF puts ‘lion’s share’ of blame on India for lower global growth projections

The International Monetary Fund (IMF) on Monday said that the global economy will grow slower than it had projected earlier and put the “lion’s share” of the blame on a “more subdued forecast” for India, which it had once called “a bright spot” amid a global slowdown.

The world economy will grow at 2.9%, 3.3% and 3.4% 0 in 2019, 2020 and 2022 respectively, according to the Fund’s January update of the World Economic Outlook. These projections are 0.1 point less than the October projection projected for 2019 and 2020 and 0.2 point for 2022.

“A more subdued growth forecast for India … accounts for the lion’s share of the downward revisions,” the outlook said.

Gita Gopinath, the Fund’s Indian-born chief economist, called India the “biggest contributor” to the downward revision, saying growth has slowed “sharply owing to stress in the non-bank financial sector and a weak rural income growth”.

The outlook reflects a growing crisis in the Indian economy, which the Fund, and the World Bank, had once called a “bright spot” amid global gloom because of “strong growth and rising real incomes”.

India’s own growth projections have been downgraded by the Fund to 4.8% in 2019, 5.8 % in 2020 and 6.5 % in 2021; 1.2 and 0.9 percentage point lower than in the October WEO.

It wasn’t just India, though despite its major role in the downward revision. The Fund blamed it on a group of “underperforming and stressed emerging market and developing economies”, which included India, Brazil, Mexico, Russia and Turkey”, largely on account of their own “country-specific” reduction in domestic demand, rather than on any global or common problem afflicting them.

The advanced economies also slowed, but as anticipated, the Fund said, “mostly reflecting softer growth in the US after several quarters of above-trend performance.”