IMF slashes India's FY20 growth outlook by 90 bps to 6.1%

The International Monetary Fund (IMF) has reduced India's growth forecast for FY20 by 90 basis points to 6.1 percent, down from the 7 percent estimate in July.

Meanwhile, the growth forecast for FY21, which stood at 7.2 percent in July, was slashed by 20 bps to 7 percent.

The downward revision in India's growth forecast by the IMF reflects a weaker-than-expected outlook for domestic demand.

Monetary policy easing and the recent corporate tax rate cuts are to support growth with a lag, the IMF said. Government programs to support rural consumption will also aid growth, the body added.

According to the IMF, in order to address the current problem of cyclical weakness in its economy, India must use monetary policy and envisage broad-based structural reforms.

A credible fiscal consolidation path is required in order to cut elevated public debt over the medium term.

India's economy, it said, is held back by sector-specific weaknesses- auto, real estate, non-banking finance companies.

On global growth, the IMF said that the US-China trade war will dampen global growth, bringing it to its slowest pace since the 2008 global financial crisis.

Its latest World Economic Outlook projections peg GDP growth at 3 percent, down from the July forecast of 3.2 percent. This is largely a fallout of the global trade fiction, and the IMF also warned on October 15 that if the ongoing US-China trade tensions persist, the growth outlook could further darken.

Earlier this month, in her first speech as IMF managing director, Kristina Georgieva had said that a slower growth is expected in 2019 across nearly 90 percent of the world.