If you look at the financial sectors, you have stress there, IMF's Gita Gopinath said.
The slowdown in India will have an effect on the global growth story and it has pushed down the global forecast by "0.1 per cent", Gita Gopinath, the Chief Economist of the International Monetary Fund or IMF told NDTV in an exclusive interview on Monday.
The International Monetary Fund has slashed India's growth forecast to 4.8 per cent, a cut of 1.3 per cent in just three months. In its World Economic Outlook released in Davos, Switzerland, the IMF has said "a more subdued growth forecast for India accounts for the lion's share of the downward revisions."
"Given the size of the Indian economy in the global GDP right now, if you have a significant downward revision for India, then it does have an impact on global growth so we revised global growth down for 2019 by 0.1% and the vast majority of that comes from the downgrade for India," Ms Gopinath told NDTV at Davos.
"If you look at the numbers which came out of the first quarters of the fiscal year 2019, they were weaker than we had anticipated last October and so, if you take those numbers into account and if you look at the weakness in credit growth in India, that is factored into our forecast for 2019 and 2020," she added.
In its report, the IMF said it believes there has been a ''downward revision to India's projection, where domestic demand has slowed more sharply than expected amid stress in the nonbank financial sector and a decline in credit growth.''
The biggest issue, Ms Gopinath said, is in the financial space. "If you look at the financial sectors, you have stress there, particularly with non-bank financial corporations. We have seen a tremendous weakness in the credit growth, business sentiment as there appears to be quite sharply an increase in risk aversion in lending in the markets. Alongside that, there has been weakness in rural income growth.''
There is an expectation, however, that there would be an uptick in GDP growth by 2021 to 6.5 per cent, "supported by monetary and fiscal stimulus as well as subdued oil prices".
The IMF report has also highlighted a link between ''intensifying social unrest across many countries-reflecting, in some cases, the erosion of trust in established institutions and lack of representation in governance structures.''
Asked whether this referred to India, Ms Gopinath said, "I have nothing really significant to say. It is something we will follow and we will see what this does in our next assessment in April".
As of now, she said, it was important to ensure that nations are protecting the vulnerable and "they are not left behind in the growth story".