International Monetary Fund lowers India’s growth projection to 7.3% in 2018

International Monetary Fund lowers India’s growth projection to 7.3% in 2018

Maurice Obstfeld, Economic Counsellor and Director of the Research Department at the International Monetary Fund.

The IMF also warned that a global trade war threatened worldwide growth and flagged uncertainties in the EU.

The IMF left its global economic growth forecasts unchanged at 3.9 percent for both 2018 and 2019 from its previous forecast issued in April.

"The risk that current trade tensions escalate further with adverse effects on confidence, asset prices and investment is the greatest near-term risk to global growth", IMF Chief Economist Maury Obstfeld told a news conference, noting that USA trade deficits are likely to grow due to high demand, possibly inflaming trade tensions further.

The IMF's updated World Economic Outlook forecast global growth of 3.9 percent this year and next, despite sharp downgrades to estimates for Germany, France and Japan.

"The recently announced and anticipated tariff increases by the USA and retaliatory measures by trading partners have increased the likelihood of escalating and sustained trade actions".

And while the fiscal stimulus will boost USA demand, it also will increase inflationary pressures, the WEO warned.

The US economy is still seen growing by 2.9 per cent this year, and the estimate for China remains 6.6 per cent, with little impact expected near term from the tariffs on tens of billions of dollars in exports the countries have imposed on each other so far.

International Monetary Fund said India's growth is expected to rise from 6.7% in 2017-18 to 7.3% in 2018-19 and 7.5% in 2019-20, as the effects of demonetisation and the introduction of the goods and services tax fade.

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". The Fund had noted in April that China's steadily slowing growth improved to 6.9pc - the first such growth since 2011.

The IMF has scaled down economic growth in Argentina and Brazil, besides India, among emerging market economies.

April and June 2018 had helped raise oil prices, benefiting emerging oil exporters, such as Russian Federation and the Middle East oil producers but harmed importers, particularly India.

The IMF noted that because of strong employment and firming inflation, the US Federal Reserve was on track to continue raising interest rates over the next two years, tightening its monetary policy compared with other advanced economies and strengthening the US dollar. Alongside the threat of greater trade disputes, Obstfeld said: "Financial markets seem broadly complacent in the face of these contingencies".

Beyond the immediate threat from weaker levels of worldwide trade, the IMF said that greater use of protectionist measures could hinder business investment, disrupt global supply chains, slow the spread of productivity-boosting technologies and raise the price of consumer goods.

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