- Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
IMF’s World Economic Outlook (WEO)
What to study?
For Prelims and mains: Key findings, reasons for slowdown and measures proposed.
Context: IMF’s 2019 World Economic Outlook (WEO) has been released.
India- specific observations:
- India retains its rank as the world’s fastest-growing major economy, tying with China.
- It has a projected growth rate of 6.1 per cent for the current fiscal year, despite an almost one per cent cut in the forecast.
- However, India’s economy is projected to pick up and grow by 7 per cent in the 2020 fiscal year.
Reasons for the cut in growth projection for India:
- India’s economy decelerated further in the second quarter, held back by sector-specific weaknesses in the automobile sector and real estate as well as lingering uncertainty about the health of non-bank financial companies.
- “Corporate and environmental regulatory uncertainty” are other factors that weighed on demand.
- The reduction in India’s growth projection for this year “reflects a weaker-than-expected outlook for domestic demand”.
Measures needed for India to revive its growth:
- Use monetary policy and broad-based structural reforms to address cyclical weakness and strengthen confidence.
- A credible fiscal consolidation path is needed to bring down India’s elevated public debt over the medium term.
- This should be supported by subsidy-spending rationalisation and tax-base enhancing measures.
- Reduce the public sector’s role in the financial system, reform the hiring and dismissal regulations.
- The world economy is projected to grow only 3 per cent this year and 3.4 per cent next year amid a “synchronised slowdown“.
- China’s economic growth will slow down to 5.8 per cent next year.
- In the Euro area, growth is projected to be only 1.2 percent this year and 1.4 next year, with the German economy expected to grow by a dismal 0.5 per cent this year.
- United States is expected to slightly better with a 2.1 per cent growth projected for this year and 2.4 per cent for the next.
- Reasons for slowdown: rising trade barriers, uncertainty surrounding trade and geopolitics, and structural factors, such as low productivity growth and an aging population in developed countries.