IMF Chief Gita Gopinath Cites "Weak Rural Income Growth" Behind India’s Growth Forecast

New Delhi, January 20, 2020:

International Monetary Fund Chief Economist Gita Gopinath cited weak rural income growth and stress in the non-bank financial sector as the reasons behind the cutting of India’s growth forecast to 4.8 percent for 2019-20 fiscal.

It may be mentioned here that the IMF on Monday slashed India’s growth forecast by 1.3 percent. While addressing the World Economic Outlook, Gita said, “We project global growth to increase modestly from 2.9 percent in 2019 to 3.3 percent in 2020 and 3.4 percent in 2021. The slight downward revision of 0.1 percentage point for 2019 and 2020, and 0.2 percentage point for 2021, is owed largely to downward revisions for India,” she said in the IMF’s World Economic Outlook (WEO) update.

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The IMF report has projected India’s growth to revive in 2020-21 to 5.8 percent, which is 30 basis points below its October estimate, “supported by monetary and fiscal stimulus as well as subdued oil prices”.

It may be mentioned here that the government of India has projected an estimated growth of 5 percent in 2019-20. The economic growth of India has become a major concern of many economists and leaders lately. There have been layoffs and issues pertaining to privatization of Public Sector Units (PSUs) have led to an economic crisis-like situation.

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Finance minister Nirmala Sitharaman is expected to accelerate the rural rural expenditure with an aim to revive growth. IMF, in December, 2019 had stated that India should adopt an easy monetary policy. “In the near-term, given the cyclical weakness of the economy, monetary policy should maintain an easing bias, at least until the projected recovery takes hold,” it said.

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