IMF forecasts slower growth rate for India; is another rate cut in offing?

By: |
Published: July 24, 2019 1:12:14 PM

With the International Monetary Fund (IMF) projecting a slower growth rate for India in 2019 and 2020, the Reserve Bank of India (RBI) may come up with another interest rate cut to boost the sluggish economy, analysts said.

RBI, RBI portfolio, RBI deputy governor, Viral Acharya, N S Vishwanathan, B P Kanungo, M K Jain, Shaktikanta Das, India is expected to growth at 7 per cent in 2019, picking up to 7.2 per cent in 2020, the IMF said in its latest update of World Economic Outlook (WEO).

With the International Monetary Fund (IMF) projecting a slower growth rate for India in 2019 and 2020, the Reserve Bank of India (RBI) may come up with another interest rate cut to boost the sluggish economy, analysts said.  “ICRA’s forecast for GDP growth for FY2020 is 6.7%, lower than the IMF’s revised forecast. Consumption trends and private investment activity remain subdued. We anticipate a rate cut in August 2019 policy review, to be followed by an extended pause to await incoming data as well as the transmission of past policy easing,” Aditi Nayar, Principal Economist, ICRA told Financial Express Online.

India is expected to growth at 7 per cent in 2019, picking up to 7.2 per cent in 2020, the IMF said in its latest update of World Economic Outlook (WEO). The downward revision of 0.3 percentage point for both years reflects a weaker-than-expected outlook for domestic demand, it added. Nonetheless, India would still be the fastest growing major economy globally and much ahead of China, the Washington-based global financial institution said.

IMF downgrade of GDP growth is the right one as the first quarter has seen a significant slowdown, veteran market investment advisor Sandip Sabharwal told Financial Express Online. “The government since it has taken over for the second time has not taken any initiatives to boost growth. There are no inflation concerns at this stage and the RBI/MPC needs to cut by at least 50 basis points in the next meeting. However, traditionally they have always disappointed,” he added.

The latest estimates by the global financial institution is in sync with the projections of various other agencies whose estimates range between 6.6 and 7.5 per cent. The IMF follows  Fitch, ADB and the RBI in slashing the earlier projection. All the institutions have commonly highlighted that both investment and consumption demand is currently low in India.

Do you know What is Repo Linked Lending Rate (RLLR), Wholesale Price Index (WPI), Public Debt, Finance Commission Grants & Other Transfers, Economic Survey? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.