IMF's Lagarde warns trade, currency wars could be detrimental for growth

IMF predicts India will grow at 7.3% in 2018-’19

Her comments come as a trade spat between China and the United States threatens economic growth around the world, with International Monetary Fund experts warning of "new vulnerabilities" in the global system.

"U.S. tariffs on China, and more broadly on auto and auto part imports, may disrupt established supply chains, especially if met by retaliation", Obstfeld said.

The IMF said that global growth rates have hit a plateau at 3.7%, and would continue to remain at this level in 2019-'20. The country's Gross Domestic Product growth rate accelerated to 8.2% in the first quarter of 2018-'19.

Elevated risk aversion and sharper tightening could come about due to growing concerns about the resilience and policy credibility of emerging markets, trade tensions, political and policy uncertainty (for instance around Brexit), and faster-than-expected monetary policy normalisation.

It will be detrimental on both accounts for all participants, Lagarde told a news conference during the annual meetings of the International Monetary Fund and World Bank in Indonesian resort island of Bali. The U.S. economy is expected to grow 2.5 percent in 2019.

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Reflecting such sentiments, growth in trade of goods and services across the world was revised down 0.6 point from the July forecast to 4.2 percent in 2018 and 0.5 point to 4.0 percent in 2019, according to the report.

The fund kept its forecast for growth in the Chinese economy unchanged at 6.6 percent this year.

But higher USA interest rates have also helped send emerging market currencies into a tailspin, as countries that borrowed heavily in dollars race to pay back debt.

Last year, China shipped goods worth $375 billion more to the US than it took in from the United States, a figure Trump has often said he wants to curb sharply in an effort to promote American businesses. "We look forward to our continuing partnership", it added.

The Treasury's currency report will be released just a few weeks after the U.S. currency manipulation guidelines were included in the new United States-Mexico-Canada Agreement. "I don't think it will go up to Rs150, the government won't allow the economy to spin out of control", he added.

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

China, however, could still be labelled a currency manipulator if the US Treasury decides to rely more heavily on the older 1988 Act, which allows for a more subjective assessment of whether a currency is being manipulated to gain unfair competitive advantage in trade.

"Notwithstanding the present demand momentum, we have downgraded our 2019 United States growth forecast owing to the recently enacted tariffs on a wide range of imports from China and China's retaliation".

He contended that China had "already retaliated" against his tariff increases.

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