An Indian worker monitors a metal structure at a plant in Kheda region, near Ahmedabad, Gujarat state. Photo: AFP

Following the Asian Development Bank and the Reserve Bank of India, the International Monetary Fund has also scaled down India’s growth projections for 2019-20 and 2020-21, citing slower growth and weak global outlook. Nevertheless, the IMF reiterated that India will continue to be the fastest growing large economy in the world.

According to IMF estimates, India’s economy grew 7.1% in the just concluded FY19 and is expected to accelerate to 7.3% this fiscal year and to 7.5% in FY21. All the estimates are 0.2 percentage points or 20 basis points below those of its previous assessment in January.

In its World Economic Outlook, the IMF said the reduction in India’s estimate is on account of the recent revision to the national account statistics that indicated softer momentum.

It called for labor reforms and expanded incentives for job creation to capitalize on the country’s demographic dividend – the positive economic effects arising from the growth in share of working-age people in the population.

Hopes for India to grow by 8% in the near future could be dashed if the projections come true. The IMF said growth in India is expected to stabilize at just under 7.75% over the medium term, based on the continued implementation of structural reforms and easing of infrastructure bottlenecks.

Both the Asian Development Bank and the Reserve Bank of India last week cut their 2019-20 growth projections for India to 7.2% from 7.4% earlier, blaming rising risks to global economic growth as well as weakening domestic investment activity.

RBI sees a slowdown in the economy and it has shifted its focus from inflationary concerns to sustaining growth. The Indian central bank had carried out two back-to-back rate cuts of 25 basis points each this year to boost growth.

As per the recent All India Index of Industrial Production, growth in the manufacturing sector slowed to 1.3% in January, while the growth of eight core industries remained sluggish at 2.1% in February.

Data released by the Society of Indian Automobile Manufacturers on Monday also signaled a slowdown in urban demand as car sales grew 2.7% in 2018-19, the worst performance in five financial years.

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