IMF Cuts India's Growth Forecast, Still Fastest Growing Economy: 10 Facts

India retains its rank as the world's fastest-growing major economy with a projected growth rate of 6.1 per cent for 2019-20, according to the IMF.

The IMF suggested that India should use monetary policy and broad-based structural reforms

India's growth forecast has been slashed by the International Monetary Fund or IMF for the financial year 2019-20, however the country still retains its rank as the world's fastest-growing major economy, tying with China. The IMF said the Indian economy is set to grow 6.1 per cent in 2019 and 7 per cent in 2020, stating that the downward revision from its April projection "reflects a weaker-than-expected outlook for domestic demand", the IMF said in its World Economic Outlook (WEO) report. The IMF report comes days after a World Bank report pegged India's growth rate in financial year 2019-20 at 6 per cent. In its previous outlook released in July, the IMF had projected a 7 per cent growth rate for India.

Here are 10 things to know about this big story:

  1. According to the IMF report, India retains its rank as the world's fastest-growing major economy with a projected growth rate of 6.1 per cent for the current fiscal year, despite an almost one per cent cut in the forecast. (Also read: Is world economy facing first recession since 2009?)

  2. In comparison, the Chinese economy - which grew 6.6 per cent in 2018 - is expected to grow 6.1 per cent rate in 2019 and 5.8 per cent in 2020, according to the IMF.

  3. It is important for India to keep fiscal deficit in check, even though its revenue projections look optimistic, said IMF Chief Economist Gita Gopinath.

  4. Growth will be supported by the "lagged effects" of monetary policy easing, a reduction in corporate income tax rates, and recent measures to address corporate and environmental regulations, according to the IMF report.

  5. The government has over the past two months announced a range of measures to revive growth, which stood at a more than six-year low in the June quarter. 

  6. It has withdrawn higher taxes on foreign investors - as announced in Budget, announced a mega consolidation plan for state-run banks and slashed the corporate taxes by almost 10 percentage points to push consumption and growth.

  7. On the monetary policy front, the Reserve Bank of India (RBI) has lowered the key interest rates five times so far this year, by a cumulative 135 basis points (1.35 percentage point). This month, the RBI lowered its growth projection for the current fiscal year to 6.1 per cent from 6.9 per cent projected in August.

  8. "In India, growth softened in 2019 as corporate and environmental regulatory uncertainty, together with concerns about the health of the non-bank financial sector, weighed on-demand," the IMF added. 

  9. The country's financial sector is struggling against more than Rs 10 lakh crore of non-performing assets or bad loans. State-run banks account for the lion's share of this amount.

  10. The IMF said its latest World Economic Outlook projections show 2019 GDP growth at 3.0 per cent, down from 3.2 per cent in a July forecast, largely due to increasing fallout from global trade friction.