IMF’s Chief Economist Gita Gopinath has said that a recovery in Indian growth is likely to occur in the first half of the 2020-21 financial year: between April and September of 2020.
In an interaction with Indian media on the sidelines of the World Economic Forum (WEF) in Davos, Switzerland, Gopinath said: “One of the major factors behind the downward revision was this weakness in credit growth. But there is also some part of it that has to do with weakness in rural income growth.”
The Indian government has lowered its own Gross Domestic Product (GDP) estimates for the current financial year to 5 percent from the 7 percent projected earlier.
India’s GDP growth has almost halved, from a high of 8 percent in April-June 2018 to 4.5 percent in July-September 2019.
The liquidity crunch in the Indian non-banking financial sector beginning in October 2018 triggered a lending crisis in the country, threatening investments and thereby impacting growth. Yet another factor that led to the slowdown in the Indian economy was the trade sanctions imposed by the US on India in June 2019, which had an overall impact of $6.3 billion. Also, the US-China trade war impacted India’s exports.
Meanwhile, Congress Party politician and former finance minister P. Chidambaram on Tuesday said he won’t be surprised if growth is even lower than the 4.8 projected by the IMF and that the multilateral agency should now be ready for an “attack” by the ministers of the ruling Bharatiya Janata party.
“Even the 4.8 percent is after some window dressing. I will not be surprised if it goes even lower,” he said.