India’s macroeconomy sound, fiscally disciplined: International Monetary Fund

The overall macroeconomic environment in India is “fairly sound”, it is fiscally disciplined and the central bank has acted quickly to bring inflation under control, the International Monetary Fund (IMF) said.

“They were fiscally disciplined. They expect household growth of 5.9 percent this year. The central bank acted quickly to bring inflation under control. The latest figure was 5 percent (for September). “So inflation is coming down.” So overall, the macroeconomic environment in India is quite solid.”

Krishna Srinivasan, Director of the IMF’s Asia-Pacific Department, said at a press conference on “Economic Prospects for the Asia-Pacific Region.”

Asked what policy interventions are needed in India at this juncture to boost growth, he said the country should think about structural reforms given India’s significant potential.

“I think if you really want to realize India’s significant potential, then I think structural reforms are necessary. Again, India has made significant progress, very impressive progress, in the area of ​​digitalization and empowerment infrastructure, where the efforts have been really impressive. But beyond that there could be reforms aimed at improving the business environment, labor reforms and removing trade restrictions. All of this is to build an environment that is more supportive of investor literacy – particularly in India. Therefore, I think structural reforms will be key to support,” he said.

Asked what impact a sharp rise in bond yields and crude oil could have on emerging India and what could be done to protect financial systems, he also suggested borrowing “cautiously.”

“In terms of rising yields, you said, I think that applies to every country. If interest rates start to rise, I think it’s important to keep an eye on the sectors that are heavily leveraged. “It’s likely to hurt even more. And this applies not only to India, but also to other countries in the region. That’s why it’s important to borrow carefully. And that applies to both the private and public sectors,” he noted.

Meanwhile, the IMF has just raised India’s GDP growth forecast for the 2023-24 fiscal year to 6.3 percent, the second upward revision since the April report.

According to the multilateral agency’s latest World Economic Outlook report released on Tuesday, growth is expected to rise 6.3 percent this fiscal year, 20 basis points (100 basis points equals 1 percentage point) more than it had in its previous report estimated.

The IMF cited higher-than-expected consumption in April-June as the reason for the upward forecast in the growth estimate.

The growth forecast was raised from 5.9 percent in April and 6.1 percent in July to 6.3 percent now, bringing it closer to the 6.5 percent forecast by the Indian authorities.

For 2024-25, the IMF estimates India’s GDP growth at 6.3 percent, although unchanged from its two previous forecasts.

The IMF forecast that consumer inflation in India will be 5.5 percent this fiscal, while the Reserve Bank of India (RBI) forecast a forecast of 5.4 percent. The RBI expects inflation to be 6.4 percent in the second quarter (Jul-Sep), 5.6 percent in the third quarter (Oct-Dec) and 5 percent in the fourth quarter (January-March). .2 percent. An increase of 5.2 percent is forecast for the first quarter (fiscal year 2024-25).

Sybil Alvarez

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