Significant Economic Slowdown.

Economic recovery will not be sudden, financial institution calls for a urgent policy actions from the government. India is now in the midst of significant economic slowdown, the International Monetary Fund(IMF) has said, urging the government to make urgent policy actions to address the current prolonged downturn. In it’s report released long back ago, the IMF Directors noted that India’s economic expansion in recent years has lifted millions of people out of poverty. However, in the first half of the 2019, a combination of factors led to subdued economic growth in India.

Cyclical , not structural regime.

The issue in India is the growth slowdown as per the recent consensus. We still believe that it is cyclical, not structural because of the financial sectors issues, we think the recovery will be not as quick as we thought earlier. That’s the main the issues. With risks to the outlook titled to the downside, the IMF directors called for continued sound marcoeconomic management. They saw the opportunity with a strong mandate of the new government to reinvigorate the reform agenda to boost the inclusive and sustainable growth. The staff report was done in August when the IMF was not fully aware of India’s current economic slowdown. Growth in the second quarter of FY 2019-20 came in at a six-year low of 4.5% ( year-on-year), and the composition of growth indicates that private domestic demand expanded by only 1% in the quarter. Most high frequency indicators suggests that weak economic activity has continued into December. The IMF attributed this to the abrupt reduction in non-banking financial companies expansion and the associated board-based tightening of credit conditions appears to be an in weak economic growth, especially rural has been affecting private consumption. Private investment has been hindered by the financial sectors difficulties(including PSB’s) and insufficient business confidence. Some implementation issues with important and appropriate structural reforms, such as the nation wide Goods and Service taxes , may also have played a role.

The IMF stated in a recent report that the new growth projections for India, which will come out in January , would be significantly lower than the previous ones.”By other measures, India still is doing well, Reserves have risen to record level. The current account deficit has narrowed. Inflation, although we have a little jump in the present situation because of vegetable prices, we think it has been under control for last few years. So, by other means India is doing quite well. The issue is primarily how to address the growth slowdown. IMF added that it was very surprising for India’s slowdown. IMF also added in the negative when asked if this slowdown can be described as an economic crisis.