As revealed by the International Monetary Fund (IMF) in its World Economic Outlook report for July 2019, the Indian economy is set to experience growth at a rate of 7% for 2019. This growth rate is forecasted to increase to 7.2% in 2020.
Comparison with Previous Forecasts
In its April 2019 report, the IMF had predicted India to grow at slightly higher rates of 7.3% and 7.5% for 2019 and 2020 respectively. The downward revision of 0.3% for both years was attributed to a weaker than expected outlook for domestic demand.
Despite these revisions, it is important to note that India will still hold the position of the fastest-growing major economy globally. Currently, both investment and consumption demand are lower than expected in India. Experts suggest that one of the reasons for this low demand is the uncertainty associated with the recently concluded general elections, as well as tighter borrowing conditions for small and medium-sized enterprises.
Aligning with Other Forecasts
The revised growth prediction of 7% for 2019 is aligned with the projections made by several other institutions such as the Reserve Bank of India, Chief Economic Adviser and the Asian Development Bank.
| Institution | Forecast for 2019 |
|---|---|
| IMF | 7% |
| Reserve Bank of India | 7% |
| Chief Economic Adviser | 7% |
| Asian Development Bank | 7% |
Global Growth Forecasts
As per the IMF’s report, the global economy has been forecasted to grow at 3.2% in 2019 and pick up to 3.5% in 2020. For the group of emerging market and developing economies, the growth is expected to be 4.1% in 2019, increasing to 4.7% in 2020.
Factors Impacting Economic Growth
The World Economic Outlook report identified increased trade and technology tensions between the United States and China, prolonged uncertainty about Brexit, and weaker-than-expected activity in emerging market and developing economies as reasons for the lowered growth forecasts.
Suggested Solutions
The IMF underscored the importance of both multilateral and national policy actions to strengthen global growth. It suggested that fiscal policy should balance multiple objectives such as guiding demand as necessary, protecting vulnerable populations, supporting potential growth through spending that encourages structural reforms, and ensuring sustainable public finances over the medium term.
Finally, the report emphasizes that if growth weakens relative to the baseline, macroeconomic policies will need to become more accommodating, varying according to country circumstances. The overarching priorities across all economies are to enhance inclusion, strengthen resilience, and address constraints on potential output growth.
About the World Economic Outlook
Published by the IMF, the World Economic Outlook is a survey that is usually published twice a year, in April and October. It provides analysis and forecasts for global economic developments during the near and the medium term. The report is also updated twice a year, typically in the months of July and October.
