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Urgent action must to reverse India's slowdown: IMF

25
Dec '19

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India must take quick steps to reverse the economic slowdown, according to the International Monetary Fund, which recently said in its annual review that declining consumption and investment, and falling tax revenue, have combined with other factors to put the brakes on one of the fastest growing economies that has been one of the engines of global growth.

India is now in the midst of a significant economic slowdown after lifting millions out of poverty, Ranil Salgado, of the IMF Asia and Pacific department, said. "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, Indian media reports cited IMF as cautioning.

IMF chief economist Gita Gopinath last week said India's slowdown had ‘surprised to the downside’, and said the fund is set to significantly downgrade its growth estimates for the Indian economy in the World Economic Outlook that will be released next month.

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."

India's economy grew at its slowest pace in more than six years in the July-September period, down to 4.5 per cent from 7.0 per cent a year ago, government statistics said.

Salgado said "the government needs to reinvigorate the reform agenda," including restoring the health of the financial sector in order to "enhance its ability to provide credit to the economy."

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