International Monetary Fund (IMF) released its annual review of India’s economy. India has one of the largest economies in the world.
This annual review helps to learn more about India and its economy. According to the IMF, India’s government should work harder to reverse the economic slowdown. It is worth mentioning that India’s economy is one of the main engines of global growth. As a result, problems connected with the local economy will have a negative impact on the global economy.
IMF listed several main problems, such as declining consumption as well as investment. All of the factors combined affected the economy. Thanks to economic growth, India was able to improve the living standards for millions of its citizens.
However, India’s economy is slowing down, and this represents a huge problem, according to Ranil Salgado. He works in the IMF Asia and Pacific Department. Salgado mentioned that to return to a high growth path, India should change its policies.
Nevertheless, the situation is more complicated as the government should be careful not exacerbate the economic slowdown.
IMF underlined that India should avoid using public funds to stimulate growth. In this situation, it is desirable to reduce the debt. This way, it will be possible to use these financial resources for other purposes, such as investment.
IMF and economy
The International Monetary Fund underlined one very important matter in its statement. Currently, India’s debt is among the highest in emerging markets. The government should tackle this problem to rejuvenate the economy.
This way India will be able to generate the revenue which is necessary to reverse the economic situation. Moreover, the IMF also stressed the importance of economic development projects and enhanced social initiatives.
Unfortunately, due to India’s slowdown, IMF most likely will downgrade its growth estimates for the country’s economy. It means that the latest World Economic Outlook, which will be released in January, will include this information.
In October, the IMF reduced its forecast for 2019 by nearly a full percentage point to 6.1%. Moreover, it made a similar decision as it also lowered the forecast for 2020 to 7%. Salgado thinks India’s central bank has the capacity to reduce the policy rate further if the economic downturn will continue in the future.
The Reserve Bank of India, which is the country’s central bank, reduced the key lending rate five times from the beginning of the year. Currently, lending rates are at the lowest level in nine years. However, during the last meeting, it made the decision to keep the policy. This decision missed expectations.
It is important to keep in mind that the central bank already cut its annual growth forecast for India from 6% to 5.1%. This is not surprising due to the problems connected with consumer demand and manufacturing activity contracts.
In the July-September period, India’s economy grew at the slowest pace in more than six years. For example, during the same period in 2018 the economy expanded by 7, while in 2019, this number fell to 4.5%.