World Economic Outlook Current Affairs - 2020

IMF: World Economic Outlook, 2019

The World Economic Outlook is a biennial report that is released in April and October. According the report released recently on October 15, 2019, the global economy is at its slowest pace of growth at 3%. This is a serious climb down from 3.8% in 2017.

Key highlights of the report

  • The Global growth rate is projected to improve to 3.4% by 2020.
  • The growth of advanced economies is projected to slow down by 1.7%
  • The emerging and developing economies are projected to experience a growth pick up from 3.9% in 2019 to 4.6% in 2020.
  • The report downgraded India’s growth projections to 6.1% in 2019 and 7% in 2020.
  • According to the report, China is projected to grow at 6.1% in 2019 and 5.8% in 2020.
  • The trade volume reached the lowest since 2012. It reduced by 1% since 2012.

Justifications

  • About half of the economic slow down comes from shallower recessions in stressed emerging markets like Argentina, Turkey, Iran
  • Higher tariffs and prolonged uncertainty in the trade policy are the major reasons for dented investment and the slowdown in the growth. This is very well seen in the effects of trade wars and imposed sanctions
  • The automobile industry is contracting mainly due to the disruptions from new standard emission standards. This predominantly has effect in China.
  • Trade barriers and geopolitical tensions like Brexit is hampering investment, confidence and growth

Recommendations

  • The countries should support the economy slow down with tax-base enhancing measures, rationalizing subsidy-spending, efficient credit allocation and governance of public sector banks.
  • India should keep its Fiscal Deficit under check

Tariff War: India levies retaliatory tariffs on 28 US products

In a tit-for-tat trade battle between the United States (US) and India, latter imposed higher tariffs on 28 American goods including almonds, apples and walnut in retaliation to US tariffs.

Key Highlights

Among targeted US products imported, the custom duty on walnut is increased from 30% to 120%, and on chickpeas, masur dal and Bengal gram (chana) has been raised from 30% to 70%.

India is expected to get about $220 million of additional revenue from the new tarriffs on items imported from the US. Just minutes before the tariffs came into force, the government dropped only one item called artemia, a type of shrimp from the tariff list.

About India-US Trade War

Background: Initially the retaliatory tariff by India, were triggered by US announcing higher duties on Indian steel and aluminium in 2018 but were deferred multiple times in view of possible trade dialogue between the two countries.

Current Scenario: Lately, India had decided to levy higher tariffs following America’s withdrawal of $5.6 billion trade concessions given to India by US under the Generalised System of Preferences (GSP) programme in June 2019 which benefitted Indian Exports. This move comes ahead of meetings between Donald Trump, President of United States and Prime Minister Narendra Modi at upcoming G20 summit on June 28-29 in Osaka, Japan.

Concern: The strain in trade relation between two economies (India-US) comes at a time when the global economic growth rate is projected to slow down as trade tensions among other major economies (like between US and China) weighs on business confidence and investments. The International Monetary Fund’s (IMF) World Economic Outlook (WEO, a biannual survey that is partly updated twice a year) in April 2019 forecasted a downfall in global growth to 3.3% for 2019, down from the 3.5% in January 2019.

Way Ahead: Also, by the end of June 2019 US Secretary of State (SoS) Mike Pompeo will be visiting India for bilateral talks with his Indian counterpart S. Jaishankar External Affairs Minister. Ahead of meet Mike stated that US was open to discussions on the Generalized System of Preferences (GSP).