IMF: India's Macroeconomic Stability and Fiscal Discipline Applauded

15 Oct, 2023

IMF: India's Macroeconomic Stability and Fiscal Discipline Applauded

The International Monetary Fund (IMF) has lauded India's robust macroeconomic conditions, emphasizing fiscal discipline and a proactive approach by the central bank to control inflation. Krishna Srinivasan, Director of the Asia and Pacific Department at the IMF, shared these sentiments during a press briefing on the 'Asia and Pacific Region's Economic Outlook.' He praised India's fiscal discipline, with an expected fiscal deficit of 5.9 percent for the year. Additionally, the swift actions taken by the central bank have effectively curbed inflation, with recent figures showing a 5 percent rate for September. Overall, the IMF views India's macroeconomic environment as stable.

When asked about policy interventions needed to boost growth in India, Srinivasan suggested that the country, given its substantial potential, should focus on implementing structural reforms. India has made significant progress in areas such as digitalization and infrastructure development, but further reforms aimed at improving the business climate, labor regulations, and trade restrictions can foster a more investor-friendly environment.

Regarding the potential impact of rising bond yields and crude oil prices on emerging markets like India, Srinivasan advised caution in borrowing, as rising interest rates can particularly affect heavily leveraged sectors. This advice applies to both the private and public sectors.

Notably, the IMF recently raised its GDP growth forecast for India in the 2023-24 financial year to 6.3 percent, marking its second upward revision since its April report. The stronger-than-expected consumption in the April-June period contributed to this growth estimate. The new forecast of 6.3 percent brings it closer to the 6.5 percent predicted by Indian authorities. For the following year (2024-25), the IMF maintained its GDP growth projection at 6.3 percent. The IMF's consumer inflation projection for the fiscal year is 5.5 percent, slightly higher than the Reserve Bank of India's forecast of 5.4 percent, with variations expected in different quarters.