THE GIST of Editorial for UPSC Exams : 11 october 2019 (Going down together: On IMF’s slowdown warning (The Hindu))

Going down together: On IMF’s slowdown warning (The Hindu)

Mains Paper 3: Economy
Prelims level: Not much
Mains level: IMFs slowdown warning

Context

  • The International Monetary Fund has some words of advice for global leaders on how to resuscitate the faltering global economy.
  • India, along with Brazil, as witnessing a “pronounced” growth slowdown as global growth experiences a “synchronised” downswing.

IMF forecast

  • The IMF expects growth to slow down in nearly 90% of the world this year, in contrast to two years ago when nearly 75% of the world witnessed accelerated growth.
  • In fact, global growth is expected to hit its lowest rate since the beginning of the current decade.
  • In July, the IMF cut its FY 2020 growth forecast for the Indian economy by 30 basis points to 7%.
  • It would not be a surprise if, given the further deterioration in growth since then, the IMF cuts its India forecast once again.
  • The usual elements where slowing growth was blamed on various factors including the trade war between the United States and China, which is expected to shave off 0.8% from global GDP by 2020.
  • As the global economy slows, interest rates are near or below zero in much of the developed world and corporations and governments are burdened with unsustainable amounts of debt.
  • While she did warn about the risks posed by the sudden reversal of capital flows and high global debt, she still did not refrain from calling for more monetary and fiscal policy actions.

Way forward

  • From an Indian point of view, what is worth noting is the IMF chief’s emphasis on the need for structural reforms to boost growth, particularly in the emerging market economies.
  • The forthcoming “World Economic Outlook” report which estimates that the right structural reforms can double the speed at which emerging market economies such as India can catch up with the living standards of people in advanced countries by raising their productivity.
  • The government at the centre, which came to power on the promise of delivering big-bang structural economic reforms, will do well to heed such advice.

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Prelims Questions:

Q.1) With reference to Society for Worldwide International Financial Telecommunication (SWIFT), consider the following statements:
1. SWIFT is headquartered in Belgium.
2. For money transfers, SWIFT assigns each participating financial organization a unique code with either eight or eleven characters.

Which of the statements given above is/are correct?
(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 Nor 2

Answer: C
Mains Questions:

Q.1) The world must heed the IMF warning that everyone loses in a trade war. Comment.