Published: Sat, October 13, 2018
Money | By Arnold Ball

International Monetary Fund predicts 7.3% growth rate for India in current fiscal year

International Monetary Fund predicts 7.3% growth rate for India in current fiscal year

Considering developments since then, however, that number appears over-optimistic: "rather than rising, growth has plateaued at 3.7 per cent", IMF Chief Economist Maurice Obstfeld said as the world body released the World Economic Outlook, its annual flagship report.

Obstefeld commented: "Last April, at the time of our last World Economic Outlook, the world economy's broad-based momentum led us to project a 3.9 percent growth rate for both this year and next".

The IMF said the downgrade "partially reflects the negative effects of the recently introduced trade measures".

"US growth will decline once parts of its fiscal stimulus go into reverse", International Monetary Fund chief economist Maurice Obstfeld said in a statement.

At the worst, which includes Trump pushing through with tariffs on all Chinese goods and on imports of cars and auto parts that spark a round of reprisals, as well as denting confidence and provoking a negative market reaction, the impact would be less than one percentage point on global growth.

The fund shaved 0.1 percentage point from America's expected GDP this year and 0.4 percentage points from growth through 2019. It left 2018 growth forecasts for the two countries unchanged at 2.9 per cent for the United States and 6.6 per cent for China.

It's the thirteenth time Pakistan has turned to the International Monetary Fund for support since the late 1980s and the lender said last week that recent government efforts haven't been sufficient to stem a looming crisis.

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"But there is no denying that the susceptibility to large global shocks has risen". Tighter financial conditions in advanced economies also could cause disruptive portfolio adjustments, sharp exchange rate movements, and further reductions in capital inflow to emerging markets with weaker fundamentals and higher political risk, it added.

India's medium-term growth prospects remain strong at 7.75 per cent, benefiting from ongoing structural reform.

The IMF warned that the world faced a permanent hit to growth if the U.S. followed through on a threat to impose a 25% on all imported cars, and global tariffs hit business confidence, investment and borrowing costs.

Trade tensions are expected to continue although Fund officials view US-Mexico-Canada trade agreement as a positive sign.

"Our reevaluation is more drastic for emerging markets as a whole, where we see growth slowing down in Latin America (especially in Argentina, Brazil, and Mexico)", Obstfeld said.

US President Donald Trump recently sanctioned tariffs on an additional Dollars 200 billion worth of Chinese goods, nearly 15 per cent of China's total exports to the US. It also assumes that Trump imposes a 25 per cent tariff on imported cars and auto parts imports.

The US simultaneously threatened to add tariffs to a further $267 billion (£205 billion) of products, which saw China retaliate with 10 percent tariffs on $60 billion (£46 billion) of US imports.

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