India in middle of significant economic slowdown, must act: IMF
That India is going through one of its worst economic slowdowns is not news anymore. And keeping the same crisis in mind, the International Monetary Fund (IMF) has asked the Indian government to take action. India is one of the "engines of global growth", hence, the government should take steps to reverse the slowdown, the international organization underlined. Here are more details.
After pulling millions out of poverty, India's economy slowed down
In its annual review, IMF said there's a dip in consumption, investment and tax revenue is also falling. Combined with other factors, these have put the brakes on one of the fastest-growing economies. Ranil Salgado, of the IMF Asia and Pacific Department, reminded that India pulled millions out of poverty but now it is in the middle of "significant economic slowdown."
Salgado said Indian banks can cut policy rate
Saying that for India to return to fast-paced growth, quick steps are needed, the IMF warned that the government can't boost spending growth. But Salgado suggested that India's banks have "room to cut the policy rate further, especially if the economic slowdown continues". The top official said the government needs to do something to restore the health of the financial sector.
India needs a more inclusive, sustainable growth, said IMF
"Without more inclusive and sustainable growth, India's potential demographic dividend over the next few decades, from its young and rapidly-growing labor force, could be wasted," IMF warned.
Interestingly, IMF claimed steps are being taken
On the bright side, IMF said, "Over the medium term, growth is projected to gradually rise to its medium-term potential of 7.3 percent." As per IMF, this will happen due to the government's policies of supporting rural consumption, facilitating monetary policy transmission, and addressing corporate and environmental regulatory uncertainty. IMF underlined that Prime Minister Narendra Modi's win in elections gives an opportunity to "reinvigorate reform agenda".
Earlier, IMF said India's slump took it by surprise
To note, in October, IMF had said it was surprised by India's economic slowdown in the recent quarters. "There wasn't a single cause for the slowdown there were many different causes at work including corporate and regulatory environmental uncertainties, the stresses in the non-bank financial sector, (and) stresses in the rural sector, among others," IMF's Deputy Director, Asia Pacific Department, Jonathan Ostry, had said.
Meanwhile, IMF's Gita Gopinath met PM Modi yesterday
Notably, IMF's statement came on a day when the organization's chief economist, Gita Gopinath met PM Modi. Earlier this month, she had suggested that the government should focus on "managing a slowdown in domestic demand" and generating employment in the middle term. "Politically, the time — early in the government's second term — is right for a structural reform push," she had said.
