Another grim reminder: On IMF’s GDP projections

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Another grim reminder: On IMF’s GDP projections


Sharp cuts in growth forecast by the IMF and World Bank underline slowdown’s severity
The IMF on Tuesday followed the World Bank in reducing( कम कर रहा) its forecast(पूर्वानुमान ) for India’s economic growth in the current financial year. While the IMF cut its July projection(प्रक्षेपण ) for real GDP growth by a substantial(पर्याप्त) 0.9 percentage point to 6.1%, the bank slashed(घटा दिया) the estimate(अनुमान) by as much as 1.5 percentage points to 6%. These magnitudes(परिमाण/मात्रा) of reduction underscore(रेखांकित ) the severity(तीव्रता/गंभीरता) of the ongoing slowdown(मंदी) and affirm the welter of grim(विकट/भयंकर) data and predictions(भविष्यवाणियाँ) from other forecasters, both global(वैश्विक ) and domestic(घरेलू). Interestingly, by the bank’s own admission, its forecast is more optimistic(आशावादी ) than the average estimate of 32 Indian respondents(उत्तरदाता/प्रावादी प्रत्यर्थी ) who were polled as part of its South Asian Economic Policy Network Survey: these economists expect growth to be 5.7% this fiscal. The only significant(महत्वपूर्ण ) issue of debate(बहस ) is over the cause(कारण ) of the malaise(बेचैनी/खराबी ), with the World Bank largely echoing(गूंज/प्रतिध्वनियन) what the Centre’s economic mandarins have been saying — that this is a cyclical(चक्रीय ) slowdown, exacerbated(गहरा बनाना/तीव्र करना ) by global influences(प्रभावित). A view, however, that neither the Indian experts surveyed(सर्वेक्षण ), nor Moody’s Investors Service, broadly(मोटे तौर पर साथ) concur with. While Moody’s pared its projection to 5.8%, ascribing( वर्णन करना) the downturn(मंदी) partly(आंशिक रूप से) to “long-lasting factors”, only 10% of the respondents in the network survey(सर्वेक्षण ) considered(विचार किया) it a “purely cyclical” development and as many as 25% saw structural factors as being solely responsible. The importance of an accurate(सटीक ) diagnosis(निदान/मूल्यांकन) cannot be overemphasised(अधिक बल देना) since policy interventions to address the malady(नुक़सान/हानि) must be targeted( लक्षित/निशाना) appropriately(उचित रूप से ) to ensure(सुनिश्चित ) enduring(टिकाऊ/सहनीय) outcomes.

Crucially(महत्वपूर्ण रूप से), the bank and the fund have flagged one area of structural weakness that could undermine any recovery(वसूली ) if left unaddressed. Asserting(दावा करना/द्दढ़तापूर्वक करना) that the weak financial sector is becoming a drag(खींचना) on momentum(गति ), with the country’s banks yet to regain(हासिल/पहुंच जाना ) vigour(शक्ति/वैधता from the depressing(निराशाजनक ) burden(बोझ) of bad loans, the World Bank warned that non-banking financial companies’ significant(महत्वपूर्ण ) share(हिस्सा) in total credit and their linkages with banks “pose broad-based contagion(छूत/संचार) risks”. Financial sector reforms(सुधार), the bank suggests, would not only help resolve the sectoral infirmities(दुर्बलता/अशक्ति) but would also help put India back on a rapid(तेजी से) growth(विकास ) path. The World Bank has also highlighted another key concern(चिंता/मामला). Observing(देख रहा) that a sharper-than-expected slowdown in major economies such as the U.S. and Eurozone could have severe(गंभीर/कठोर ) spillover impacts(प्रभाव ), the bank noted that India was vulnerable(खतरा/असुरक्षित/चपेट में ) to being affected(प्रभावित ) immediately and over a longer duration by real GDP shocks in these advanced economies. In the case of a Chinese GDP shock, the onset of the impact on India would likely be delayed but substantially more pronounced(स्पष्ट/निश्रित). And while the IMF has urged structural reforms in labour and land laws to boost( बढ़ावा देना) job and infrastructure creation(निर्माण), everyone agrees that becalmed domestic consumption(खपत ) demand(मांग) is the biggest drag on momentum. It may, therefore, make a lot of sense to heed Nobel laureate Abhijit Banerjee’s prescription(निर्धारण/नुस्खा) and put more money in the hands of consumers, especially those in the rural(ग्रामीण ) hinterland, to reinvigorate(मजबूती/पुनर्जीवित करना) demand.


Important Vocabulary

1. affected(प्रभावित )
2. ascribing( वर्णन करना
3. Asserting(दावा करना/द्दढ़तापूर्वक करना)
4. appropriately(उचित रूप से
5. boost( बढ़ावा देना)
6. creation(निर्माण),
7. considered(विचार किया
8. Crucially(महत्वपूर्ण रूप से
9. depressing(निराशाजनक
10. diagnosis(निदान/मूल्यांकन)
11. enduring(टिकाऊ/सहनीय
12. grim(विकट/भयंकर
13. infirmities(दुर्बलता/अशक्ति
14. magnitudes(परिमाण/मात्रा
15. malady(नुक़सान/हानि)
16. malaise(बेचैनी/खराबी
17. partly(आंशिक रूप से
18. rapid(तेजी से)
19. predictions(भविष्यवाणियाँ)
20. prescription(निर्धारण/नुस्खा)
21. reducing( कम कर रहा)
22. reinvigorate(मजबूती/पुनर्जीवित करना)
23. severe(गंभीर/कठोर
24.vulnerable(खतरा/असुरक्षित/चपेट में

Sources : The Hindu

Sharp cuts in growth forecast by the IMF and World Bank underline slowdown’s severity
The IMF on Tuesday followed the World Bank in reducing its forecast for India’s economic growth in the current financial year. While the IMF cut its July projection for real GDP growth by a substantial 0.9 percentage point to 6.1%, the bank slashed the estimate by as much as 1.5 percentage points to 6%. These magnitudes of reduction underscore the severity of the ongoing slowdown and affirm the welter of grim data and predictions from other forecasters, both global and domestic. Interestingly, by the bank’s own admission, its forecast is more optimistic than the average estimate of 32 Indian respondents who were polled as part of its South Asian Economic Policy Network Survey: these economists expect growth to be 5.7% this fiscal. The only significant issue of debate is over the cause of the malaise, with the World Bank largely echoing what the Centre’s economic mandarins have been saying — that this is a cyclical slowdown, exacerbated by global influences. A view, however, that neither the Indian experts surveyed, nor Moody’s Investors Service, broadly concur with. While Moody’s pared its projection to 5.8%, ascribing the downturn partly to “long-lasting factors”, only 10% of the respondents in the network survey considered it a “purely cyclical” development and as many as 25% saw structural factors as being solely responsible. The importance of an accurate diagnosis cannot be overemphasised since policy interventions to address the malady must be targeted appropriately to ensure enduring outcomes.
Crucially, the bank and the fund have flagged one area of structural weakness that could undermine any recovery if left unaddressed. Asserting that the weak financial sector is becoming a drag on momentum, with the country’s banks yet to regain vigour from the depressing burden of bad loans, the World Bank warned that non-banking financial companies’ significant share in total credit and their linkages with banks “pose broad-based contagion risks”. Financial sector reforms, the bank suggests, would not only help resolve the sectoral infirmities but would also help put India back on a rapid growth path. The World Bank has also highlighted another key concern. Observing that a sharper-than-expected slowdown in major economies such as the U.S. and Eurozone could have severe spillover impacts, the bank noted that India was vulnerable to being affected immediately and over a longer duration by real GDP shocks in these advanced economies. In the case of a Chinese GDP shock, the onset of the impact on India would likely be delayed but substantially more pronounced. And while the IMF has urged structural reforms in labour and land laws to boost job and infrastructure creation, everyone agrees that becalmed domestic consumption demand is the biggest drag on momentum. It may, therefore, make a lot of sense to heed Nobel laureate Abhijit Banerjee’s prescription and put more money in the hands of consumers, especially those in the rural hinterland, to reinvigorate demand.

 

 

 

 

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