World Economic Outlook Current Affairs - 2019
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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.
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).
Tags: artemia • External Affairs Minister • G20 summit • Generalised System of Preferences • India-US Trade War • International Monetary Fund • Mike Pompeo • Retaliatory Tariffs • S Jaishankar • Tariffs on US goods • US Secretary of State • US-China trade war • World Economic Outlook
The International Monetary Fund (IMF) in the World Economic Outlook 2019 April report has made the following forecasts:
- The global growth will be 3.3% in 2019, down from 3.6% in 2018 and 4% in 2017.
- The reduced growth rates are attributed to lower global expansion in the second half of 2018 caused by U.S.-China trade tensions, macroeconomic stress in Turkey and Argentina, tighter credit policies in China and financial tightening plus normalisation of monetary policy in advanced economies.
- Global growth is expected to level out at 3.6% over the medium term beyond 2020. The growth would be driven by a moderation in expansion in advanced countries (caused by weak productivity growth and slow labour force growth) and the stabilisation of emerging market expansion at 2020 levels.
- Advanced economies are expected to slow down to 1.6% growth by 2022 and remain at that rate thereafter.
- Growth is expected to steady at 4.8% over the medium term For emerging markets and developing countries.
- The emerging markets and developing countries are growing faster than advanced economies. Their contribution to global growth is expected to increase from 76% to 85% over the next five years.
- China is expected to slow down to 5.5% by 2024 as it moves towards increasing private consumption and services and regulatory tightening.
Estimates for India
- India’s economy will grow 7.1% in 2019-20 and is expected to accelerate to 7.3% growth this fiscal and to 7.5% in 2021-22. All the estimates are 0.2 percentage points less than its previous assessment in January.
- IMF estimates are higher than those of the Reserve Bank of India. RBI had last week cut its growth forecast to 7.2% for this fiscal and 7.4% for FY21.
- The reduction in India’s estimate is on account of the “the recent revision to the national account statistics that indicated somewhat softer underlying momentum”.
- IMF suggests reforms to hiring and dismissal regulations to help incentivise job creation and absorb the country’s large demographic dividend.
- India’s growth is expected to stabilise at 7.75% over the medium term, driven by structural reforms and the easing of infrastructure bottlenecks.
IMF calls for continued implementation of structural and financial sector reforms in order to lower public debt and aid growth.