The chief economist of the International Monetary Fund (IMF) Gita Gopinath has recently announced that the IMF would ‘significantly’ reduce India’s growth rate estimate. Gopinath has made this statement in the recently held Times Network India Economic Conclave and that the IMF would review the October estimates in January 2020. In October, the IMF had forecasted India’s growth at 6.1% in 2019 and up to 7% in 2020. Gopinath has said,
If you look at recent incoming data, we would be revising our numbers and release them in January, and it is likely to be significant downward revision for India.
Gopinath remarked that India had been the only emerging market that has shown such figures, which has taken many by surprise but refused to divulge any further details about the forecast in January. The Reserve Bank of India, the central bank of the country and other economists have already cut down their growth estimates for the country’s FY2020 as there is the absence of private investments, reduction in consumption and low exports. Due to these factors, the GDP growth has hit a six-year low of 4.5% in September 2019. The chief economist has also cast some doubt over the possibility of India being able to achieve the target of $5 trillion GDP by FY2025. For this target to be achieved, the country needs a nominal growth of 10.5% (compared to 6% in the last 6 years) and real growth of 8-9%, which would require significant land and labor market reforms by the government.
The current fiscal situation is a ‘challenging’ one as the country has breached its 3.4% deficit target, Gopinath said, and no measures have been taken to increase the revenue after corporate taxes were reduced. She also mentioned,
The stressed asset troubles in India and the capacity limitations in handling the resolution cases in the National Company Law Tribunals.
Policymakers should address and resolve the issues hitting the financial sector as soon as possible. Gopinath further added that rural income growth was also an important area that needed attention as farm productivity has to be increased, an aspect in which India is much below the global average. She refused to draw a comparison with China in terms of the condition of the economy as both economies are different and a comparison would be unfair.
