In a major setback for India on the economic front, the International Monetary Fund (IMF) on Monday slashed its growth rate to 4.8 per cent for the current fiscal year which is expected to rise to 5.8 per cent in 2020.

The IMF attributed the slash in growth rate to the slowdown in demand in the domestic market and stress in the nonbank financial sector.

“India’s growth is estimated at 4.8 percent in 2019, projected to improve to 5.8 percent in 2020 and 6.5 percent in 2021,” said IMF in a statement.

The 5.8 per cent estimate in 2020 is down by 0.9 per cent from the previous estimate.

The steep cut in India’s growth rate has affected the IMF’s projection on the world economy, which is now expected to expand 2.9 per cent in 2019 as compared with the previous forecast at 3.0 per cent.

In its World Economic Outlook Report, IMF stated that the growth markdown largely reflects a downward revision to India’s projection, where domestic demand has slowed more sharply than expected amid stress in nonbank financial sector and a decline in credit growth.

According to IMF, the global economy is expected to accelerate to 3.3 per cent in 2020 from 2.9 per cent in 2019. Further, it is expected to rise to 3.4 per cent in 2021.

However, the IMF has in its latest estimates trimmed the global growth rate by 0.1 per cent each for 2019 and 2020 and by 0.2 percentage for 2021.

Earlier in December, IMF chief economist Gita Gopinath had estimated a likely cutdown in India’s growth estimate during the January review.

United Nations had also cut down India’s growth estimate for Financial Year 2020 to 5 per cent from 5.7 per cent. World Bank had also cut its estimate to 5 per cent from its earlier prediction of 6 per cent.