Indian economic growth ‘much weaker’ than expected: IMF; Industrial production growth slows to 4.3% in July 2019

India’s economic growth is “much weaker” than expected, the IMF said, attributing the reasons to corporate and environmental regulatory uncertainty and lingering weaknesses in some non-bank financial companies.

The International Monetary Fund (IMF) projected a slower growth rate for India in 2019 and 2020, a downward revision of 0.3 per cent for both the years, saying its GDP will now grow respectively at the rate of 7 and 7.2 per cent a weaker-than expected outlook for domestic demand.

However, India will still be the fastest growing major economy of the world and much ahead of China, the Washington-based global financial institution had said.

“We will have a fresh set of numbers coming up but the recent economic growth in India is much weaker than expected, mainly due to corporate and environmental regulatory uncertainty and lingering weakness in some non-bank financial companies,” IMF spokesman Gerry Rice told reporters. The risks to the outlook are tilted to the downside, he added.

Responding to a question on the recent GDP figures of India, Rice said the IMF will monitor the economic situation in India. “We will update that assessment in the upcoming world economic outlook,” he said

Meanwhile, India’s industrial production growth slipped to 4.3 per cent in July 2019, mainly on account of poor show by the manufacturing sector, according to official data. Factory output, as measured in terms of Index of Industrial Production (IIP), had expanded 6.5 per cent in July 2018.

A slowdown was witnessed in the manufacturing sector, which grew at 4.2 per cent in July as compared to 7 per cent a year ago. The power generation sector grew at 4.8 per cent in July, compared to 6.6 per cent a year ago earlier. Mining growth was 4.9 per cent in July as against 3.4 per cent in the corresponding month of the last fiscal.

Retail inflation inched up marginally to 3.21 per cent in August from 3.15 per cent in July, mainly due to costlier food items. However, inflation number still remains within the Reserve Bank’s comfort level. The rate of price rise in the food basket was 2.99 per cent in August, up from 2.36 per cent in the previous month, as per the Consumer Price Index (CPI) data released by the Ministry of Statistics & Programme Implementation. The CPI-based inflation was 3.69 per cent in August 2018. The RBI, which mainly factors in CPI while arriving at its bi-monthly monetary policy, has been asked by the government to keep inflation at around 4 per cent.

Shekhar Ghosh is consulting editor, Indoasiancommodities.com. He has edited and written for publications like Business India, Business Standard, Business Today, Outlook and many other international publications. He can be reached at shekhar.ghosh@indoasiancommodities.in.

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