International Monetary Fund (IMF) said on Tuesday that India's GDP will grow at a rate of 7 and 7.2 percent in the next two years, indicating slower growth rate for India as well as weak domestic demand in the future.
The World Economic Update (WEO), released by Indian-origin IMF's Chief Economist Gita Gopinath said: "India's economy is set to grow at 7.0 per cent in 2019, picking up to 7.2 per cent in 2020. The downward revision of 0.3 percentage point for both years reflects a weaker-than-expected outlook for domestic demand."
However, the global financial institution also said that India will still be the fastest-growing major economy of the world and much ahead of China.
The Chinese economy has witnessed a slowdown due to the negative effects of escalating tariffs and weakening external demand and needed regulatory strengthening to rein in high dependence on debt, according to the IMF.
Gopinath said the global growth is projected at 3.2 percent in 2019 and 3.5 percent in 2020 which is a drop of 0.1 percentage point for the growth projection made in April.
"While this is a modest revision of 0.1 percentage points for both years relative to our projections in April, it comes on top of previous significant downward revisions. The revision for 2019 reflects negative surprises for growth in emerging market and developing economies that offset positive surprises in some advanced economies," she said.
Previous growth in global trade projected by the IMF was slashed and declined by 0.9 percent to 2.5 percentage in 2019. Reuters said that trade should rebound and grow by 3.7 percentage point less than the percentage point stated in the previous forecast.
Trade volume growth
IMF states that the trade volume growth declined to around 0.5 percent in the first quarter making it its slowest pace since 2012. It also said that the slowdown is mainly affecting emerging Asian countries.
The Netherlands Bureau of Economic Policy Analysis (CPB) estimated that the global trade volumes fell 2.3 percent between October and April which is said to be the steepest decline in six months since the 2009 Great Recession.
Gopinath reasoned that the global economy is witnessing a decline due to prolonged policy uncertainty as trade tensions remain heightened despite the recent US-China trade truce. Other technology-related tensions have threatened global technology supply chains, and the prospects of a no-deal Brexit have increased, she said.
"To help resolve conflicts, the rules-based multilateral trading system should be strengthened and modernised to encompass areas such as digital services, subsidies and technology transfer," Gopinath added.