Daijiworld Media Network - Washington (SHP)
Washington, Dec 24: International Monetary Fund has urged India to promptly take steps to reverse the economic slowdown taking place in the economy which is widely known as one of the engines of global growth.
Declining consumption and investment, and falling tax revenue, among other factors have contributed to economic crisis in one of the fastest-growing economies in the world, the IMF said in its annual review.
After lifting millions out of poverty, "India is now amid a significant economic slowdown”, Ranil Salgado of the IMF Asia and Pacific Department told reporters. "Addressing the current downturn and returning India to a high growth path requires urgent policy actions," he added.
However, the government has limited space to boost spending to support growth, especially given high debt levels and interest payments, the fund warned.
IMF chief economist Gita Gopinath last week said India’s slowdown had 'surprised to the downside', and stated that the fund would drastically downgrade its growth estimates for the Indian economy in the World Economic Outlook set to be released in the year 2020.
The IMF in October slashed its forecast for 2019 by nearly a full point to 6.1 per cent, while cutting the outlook for 2020 to 7.0 per cent. Salgado said India’s central bank has 'room to cut the policy rate further, especially if the economic slowdown continues.'
The Reserve Bank of India (RBI) cut the key lending rate five times in 2019 to a nine-year low, but at its last meeting, earlier this month defied expectations by keeping policy unchanged. The central bank also cuts its annual growth forecast to 5 per cent from 6.1 per cent, as consumer demand and manufacturing activity contracted.
As per the government data, for the first time in over six years, the Indian economy grew at a slow rate in the July-September period, down to 4.5 per cent from 7.0 per cent a year ago. Salgado said, "The government needs to reinvigorate the reform agenda”, including restoring the health of the financial sector to 'enhance its ability to provide credit to the economy'."