Gita Gopinath says IMF could significantly downgrade India growth forecast in January review

The International Monetary Fund (IMF) is likely to cut India's growth estimate 'significantly' in January 2020, Chief Economist Gita Gopinath said on December 17.

Speaking at the Times Network India Economic Conclave, the India-born economist said the IMF will be reviewing the October estimates in January.

"If you look at recent incoming data, we would be revising our numbers and release them in January, and it is likely to be a significant downward revision for India," she said.

In its October forecast, IMF had estimated India's growth at 6.1 percent in 2019 and up to 7 percent in 2020.

While she said India has thrown a surprise by being the only emerging market to have had such a show, she refused to share any further details on the upcoming January forecast.

The country's central bank and some other analysts have already revised its growth estimates downward for FY20 and blamed it on the persistent slack in consumption, absence of private investments and sluggish exports. These factors also led the GDP growth to slide to a six-year low of 4.5 percent in September.

Gopinath also expressed some doubts over the country being able to achieve $5 trillion GDP target by FY2025. She pointed out that India will need nominal growth of at least 10.5 percent compared with 6 percent in the last six years, and real growth of at least 8-9 percent to be able to achieve the target.

Bringing about massive land and labour market reforms will be crucial for the government to achieve the $5 trillion aspirations, she noted.

She termed the current fiscal situation 'challenging' and raised concerns about the country breaching its 3.4 percent deficit target. While she acknowledged the cut in corporate taxes, she also pointed out the absence of any measures to increase revenue.

Gopinath also talked about the stressed asset troubles in India and the capacity limitations in handling the resolution cases in the National Company Law Tribunals. She called out to policymakers to address the issues in the financial sector at the earliest.

Rural income growth, she noted, was another crucial aspect that needed focus, drawing attention to the need to find ways to increase farm productivity which is currently much lower than world averages.

She preferred to avoid an opinion on whether India or China is worse in terms of the state of the economy. Both the economies are different and a comparison is not possible, she said.