“India must be vigilant, hasten reforms”
As the International Monetary Fund cuts India’s gross domestic product rate to 7.4% for 2022-23, economic experts have suggested policymakers need to keep a watchful eye on a fast-changing and riskier world. . Note that in its April estimates, the IMF had forecast Indian economic growth at a rate of 8.2%.
Also Read: IMF Cuts India’s Growth Forecast for 2022-23, But Will Remain Among Fastest Growing Economies
Let’s understand what the experts have to say:
Amid global uncertainties and their impact on India with implications for key imports like crude oil, it is no surprise that the IMF cut India’s growth outlook by 0.8 points. percentage to 7.4% for the current fiscal year.
Like the rest of the world, especially the United States and major European societies like the United Kingdom and Germany, India is reeling from high levels of inflation, forcing the Reserve Bank of India to raise interest rates.
In line with the cascading effect in the economic value chain, the high cost of borrowing is bound to affect consumer demand. Industry and banks just emerging from the protracted “double bottom line” problem would be cautious about committing to new investments and new loans.
The continued pressure on the rupee against the pressure is also leaving an impact on the cost of essential imports. This leads to a further contraction in demand.
However, the situation in India is better compared to other comparable economies, and any growth above 7% under the given circumstances is not a bad deal, even if we only achieve this after witnessing a big setback in 2020-21 and 2021-22.
Signals from the external sector are not too comforting, even though India has large foreign exchange reserves of around $580 billion. The war between Ukraine and Russia will not end any time soon, which makes it difficult for net importing countries like India. Some smart moves such as direct imports of crude oil will need to continue and exports need a boost. Export restrictions should rarely be applied.
There is also a latent concern over Indian exports of software services. While most majors, including TCS and Infosys, reported no declines in the deal pipeline, the sentimental impact is visible, at least in financial markets.
It’s time to keep a watchful eye on the fast-paced and riskier world! Meeting the IMF forecast would in itself be considered a fair deal.
Vice President, Barclays
Following the revision of India’s growth rate from 7.8% to 7.2% by the Reserve Bank of India, the International Monetary Fund has also revised its projection of India’s growth rate. India from 8.2% to 7.4% based on changes in the global economic outlook due to the ongoing Russian-Ukrainian war and the potential risk of a global recession.
Even though the IMF has factored in global economic issues for this downgrade, the real concern for the Indian economy should be the unpredictable monsoon that is expected to result in a slowdown in the agricultural sector, the engine of growth in the pandemic years.
The climate risk is now real with unexpected heat in London and shifting rainfall patterns in India, which could hurt economic growth before nations adjust to the new normal. The growth revision would not have factored this risk into the revised projections.
Policymakers, including the central bank, must balance the delicate balance between widening the fiscal deficit and tightening monetary policy to ensure that aggregate demand in the economy and animal minds of investors are not not destroyed. For this, the key is to accelerate economic reforms to reduce costs, improve competitiveness, increase efficiency and reduce bureaucracy in order to unlock the potential of industrial production.
India’s robust domestic market has high growth potential for decades.
Dr Utsav Kumar Singh
Assistant Professor of Economics at Shaheed Bhagat Singh College, University of Delhi
The covid-19 pandemic and the Russian-Ukrainian confrontation have continued to affect economies around the world. In its report, the IMF decelerated India’s growth by 80 basis points to 7.4% due to less supportive external factors and more frequent policy tightening.
High inflation caused by supply chain disruption has forced policymakers around the world to raise the federal banks’ repo rate. Last year, the Reserve Bank of India raised the repo rate twice in an effort to curb inflation, which is at the upper limit of 6%.
The ripple effect would reduce the prospect of new ventures. Therefore, the bank will pay high interest on people’s deposits in the short term. The new investment in the market would see a downward trend. The situation would lead to the creation of stagflation in the economies.
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Last updated July 26, 2022 11:45 PM IST