The IMF issued a warning that emergency measures are needed to revive India’s falling economy. India, which received its worst economic report in six years, has been reducing the need for stimulus measures. But it has been reluctant to cut additional interest rates due to unstable prices.
The IMF said in its annual review on 23rd that the decline in consumption, investment, and tax revenues is putting a brake on India’s fastest-growing economy, adding that a breakthrough is necessary.
Ranil Salgado, the IMF’s Asia-Pacific DDP, explained that urgent policies are urgent to address the economic downturn. And also bring India back to the path of high growth. Adding that India’s central bank has room to lower its key interest rate further if the economic slowdown continues.
He then suggested that the Indian government needs to inject new forces into economic reform tasks. Including restoring the soundness of the financial sector.
Why the IMF warns India
In the aftermath of the global economic slowdown and trade war, exports of Indian goods backtracked for the fourth straight month until last month. The drop in exports led to a drop in corporate investment and consumer spending, eating into growth.
India’s quarterly GDP growth has been on a downward path since hitting 8.0 percent in the second and fourth quarters of last year. Falling to 4.5 percent in the third quarter of this year, the lowest in six years.
As India’s economy retreated, the IMF slashed India’s growth forecast for this year to 6.1 percent from 7.3 percent in October. It also lowered its growth forecast for next year to 7.0 percent from 7.5 percent. India’s central bank also lowered its growth outlook for the 2019 fiscal year to 5 percent from 6.1 percent. Fearing a slowdown in consumption and a slowdown in manufacturing.
Indian authorities have slashed the key interest rate by a total of 1.35 percentage points on five occasions this year. Saying they will spur economic growth by reviving domestic demand and private investment. Starting from 6.50 percent this year, the benchmark rate dropped 0.25 percentage points each in February, April, and June, 0.35 percentage points in August and again 0.25 percentage points in October.
