International Monetary Fund predicts 7.3% growth rate for India in current fiscal year

Finance Minister Asad Umar says decision is taken after consulting leading economists

They show that a burst of strong growth, fueled partly by United States tax cuts and rising demand for imports, was starting to wane. In September, Trump imposed tariffs on almost $200 billion of Chinese imports, with China responding with higher tariffs on about $60 billion of US imports.

"If you have the world's two largest economies at odds, that is a situation in which everyone, everyone is going to suffer", International Monetary Fund chief economist Maurice Obstfeld said Tuesday.

"Not only have some downside risks we identified in the last WEO (World Economic Outlook) been realised, the likelihood of further negative shocks to our growth forecast has risen".

The financial market volatility will likely continue next year, because the US Federal Reserve, after raising the federal funds rate by 25 basis points in its September 26 meeting, nonetheless signaled another rate hike by the end of this year and maintained its projection for three rate hikes in 2019.

Germany, the economic powerhouse of Europe, could be particularly hard hit by a drop in manufacturing orders and trade volumes.

The IMF has lowered its forecast for global growth this year and next. The previous devaluations were in the range of 5 per cent.

The normalization of monetary policy in the United States as well as a stronger dollar and escalation in trade tensions has already begun to affect emerging market economies, the Fund said.

The trouble is that the global slowdown looks largely induced by politics. "Any sharp reversal for emerging markets would pose a significant threat to advanced economies".

The rapid build-up in debt in China in recent years also is a concern, although Chinese authorities have taken steps to rein in debt growth, he said.

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"The forecast does not incorporate the impact of further tariffs on Chinese and other imports threatened by the United States, but not yet implemented, due to uncertainty about their exact magnitude, timing, and potential retaliatory response", the International Monetary Fund said.

Some energy-rich emerging market countries have fared better due to higher oil prices, with Saudi Arabia and Russian Federation receiving upgrades to growth forecasts.

Jameel Ahmad, global head of Currency Strategy & Market Research at FXTM, said by all accounts, situation for rupee could get much worse before it gets better.

"We'll be listening very attentively when and if they come to us", Obstfeld said.

The IMF now expects South Africa's economy to expand 0.8 percent, down from a forecast of 1.5 percent in July.

The model also includes the effects of a reduction in business confidence that reduces investment and leads to a tightening of financial conditions.

In September, the US implemented another round of tariffs on $200 billion worth of Chinese goods, which were met with countermeasures out of Beijing on $60 billion worth of USA goods.

The IMF warned that the world faced a permanent hit to growth if the U.S. followed through on a threat to impose a 25% on all imported cars, and global tariffs hit business confidence, investment and borrowing costs.

President Trump has slapped tariffs on US$250 billion in Chinese goods this year, and Beijing has retaliated with levies on US$110 billion of American products.

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