HYDERABAD: THE International Monetary Fund on Tuesday revised India’s FY20 GDP growth estimates downwards to 6.1 per cent from its earlier projection of 7.3 per cent.
IMF’s sharp reduction of 1.2 per cent is in line with forecasts of other agencies, including the World Bank, Moody’s and the RBI, whose revised growth figures range between 5.8 and 6.3 per cent.
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“Growth will be supported by the lagged effects of monetary policy easing, a reduction in corporate income tax rates, recent measures to address corporate and environmental regulatory uncertainty, and government programmes to support rural consumption,” the IMF said.
In its latest World Economic Outlook, it, however, projected India’s growth to pick up to a respectable 7 per cent in the next fiscal.
India’s growth softened on account of corporate and environmental regulatory uncertainty, while concerns about the health of NBFCs weighed on demand.
“India’s economy decelerated further in the second quarter, held back by sector-specific weaknesses in the automobile sector and real estate as well as lingering uncertainty about the health of nonbank financial companies,” it added.
According to IMF, in India, monetary policy and broad-based structural reforms should be used to address cyclical weakness and strengthen confidence.
It added that a credible fiscal consolidation path was required to reduce India’s elevated public debt over the medium term.
This should be supported by subsidy-spending rationalisation and tax-base enhancing measures.
Governance of public sector banks and the efficiency of their credit allocation needs strengthening, and the public sector’s role in the financial system needs to be reduced, it added.