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IMF’s World Economic Outlook (WEO)

Topics Covered:

  1. 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:

  1. Use monetary policy and broad-based structural reforms to address cyclical weakness and strengthen confidence.
  2. A credible fiscal consolidation path is needed to bring down India’s elevated public debt over the medium term.
  3. This should be supported by subsidy-spending rationalisation and tax-base enhancing measures.
  4. Reduce the public sector’s role in the financial system, reform the hiring and dismissal regulations.

 

Global scenario:

  1. The world economy is projected to grow only 3 per cent this year and 3.4 per cent next year amid a “synchronised slowdown“.
  2. China’s economic growth will slow down to 5.8 per cent next year.
  3. 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.
  4. 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.
  5. 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.

Sources: the Hindu.