Introduction:

At recent International Monetary Fund (IMF) and World Bank meeting,

• Finance Ministers and central bank Governors by and large played down fears about a slowing global economy.
• Pause in the U.S.’s interest rate policy in February, ease in the country’s trade tensions with China, and receding risk of a hard Brexit have brought some respite.
• However, IMF has consistently emphasised a cautious stance on the current growth trajectory for some months.

Key points:

• IMF has projected that global growth will be 3.3% in 2019, down from 3.6% in 2018 and 4% in 2017.
• This lower projection is due to a slower global expansion in the second half of 2018 caused by U.S.-China trade tensions, macroeconomic stress in Turkey and Argentina, growing uncertainty over Britain’s exit from the European Union, tighter credit policies in China and financial tightening, apart from a normalisation of monetary policy in advanced economies.
• World has witnessed deteriorating trade climate in the last two years.
• The pace of exports and imports was 4.6% in 2017, the strongest since the rebound after the 2007-08 financial crisis. But the 2018 figures were a modest 3% and could fall much further this year, says the WTO.
• Beyond 2020, the report said global growth would be sustained at about 3.6% because of the increase in the relative size of economies such as China and India, which are projected to have robust growth.

IMF on India

• India GDP growth seen at 7.3% in 2019-20 and 7.5% in 2020-21, 20 basis points lower than earlier IMF estimates.
• Continued economic reforms, with efforts to reduce public debt, is essential to Indian economy’s growth, says IMF.
• The IMF report emphasized enhancing governance of public sector banks and reforms to hiring and dismissal regulations that would incentivize job creation and absorb the country’s large demographic dividend.
• Also efforts should also be enhanced on land reform to facilitate and expedite infrastructure development.
• This should be supported by strengthening Goods and Services Tax compliance and further reducing subsidies.
• IMF commended the government for taking steps to strengthen financial sector balance sheets through accelerated resolution of non-performing assets (NPAs) under a simplified bankruptcy framework.