India remains the world's top-performing major economy with a growth rate of 7 per cent for the current fiscal year despite a second cut in projections this year by the International Monetary Fund (IMF), and the Chief Economist, Ms. GIta Gopinath, said she expected to see some improvements in the near term.
The World Economic Outlook (WEO) Update released on Tuesday in Santiago, by Ms. Gopinath, projects the Indian economy's growth rate to increase to 7.2 per cent next financial year. The cut in growth projection for both years was 0.3 per cent from that made in April and it was attributed to 'a weaker-than expected outlook’ for domestic demand.
The April WEO had cut the earlier growth projection by 0.2 per cent for this and next financial year. The 7 per cent growth rate for this year is higher than the 6.8 per cent last year.
India's growth rate is more than double the growth projection for the global economy, which the IMF said would be 3.2 per cent for this year and 3.5 per cent for the next. The IMF growth projection matches the 7 per cent made in May by the UN for this year and is slightly higher than the UN's 7.1 per cent for the next year.
Ms. Gopinath told reporters that the IMF expected to see some improvement in investment and consumption in India 'in the near term and that along with a more accommodative monetary policy and fiscal policy of the Indian government should remove some of the downside risks'.
Explaining the reason for the cuts, she said: 'There was weakness that was fairly broad-based in investment and in consumption in the first quarter of this year.'
She added: 'Some of this was a reflection of the run-up to the elections and the uncertainties associated with that. There was also some tightening of financial conditions, especially for small and medium enterprises'.
China's growth rate for this year is projected by the Update to be 6.2 per cent for this year and to go down to 6 percent next year. For both years, the IMF cut the April projections by 0.1 per cent.
The IMF attributed the slow growth of the global economy to the US increasing tariffs on certain Chinese imports and China retaliating. Further, 'global technology supply chains were threatened by the prospect of US sanctions, Brexit-related uncertainty continued, and rising geopolitical tensions roiled energy prices'.