Indian economy experienced abrupt slowdown in 2019, but it’s not in a recession: IMF MD

Kristalina Georgieva   | Photo Credit: AFP

The Indian economy experienced some abrupt slowdown in 2019 due to turbulence in non-banking financial institutions and major reform measures such as GST and demonetisation, but it is not in a recession, International Monetary Fund(IMF) Managing Director Kristalina Georgieva has said.

“The Indian economy indeed has experienced an abrupt slowdown in 2019. We had to revise our growth projections, downwards to 4% for last year. We are expecting 5.8%(growth rate) in 2020 and then an upward trajectory to 6.5% in 2021,” Georgieva told a group of journalists in Washington on Friday.

“It appears that the main reason for this slowdown was the non-banking financial institutions experiencing a turbulence,” she said on the eve of Union Finance Minister Nirmala Sitharaman presenting the annual budget in Parliament on Saturday.

She said India had undertaken some important reforms that over the longer term would be beneficial for the country, but they do have some short-term impact.

“For example, coming with the unified tax system, and the demonetisation took place. These are steps that over time are beneficial, but of course they might be somewhat disruptive over short term,” Georgieva said in response to a question.

The IMF MD said that there is not a lot of fiscal space in India. But we also recognise that the policies of the government on that side, on the fiscal side have been prudent. We will see how the reading of the budget, the submission of the budget goes, tomorrow, she said. In the medium-term, she said, the IMF remains optimistic about India. This is why we see that upswing potential for the growth in the country, she said.

Georgieva said that the current economic slowdown cannot be described as a recession.

She noted that the consumption in India also slowed down and that contributed to the overall slowdown in the economy. The IMF would be keen to see what India does to get relatively sound macroeconomic fundamentals to pay off in terms of better growth trajectory, she said ahead of the budget.

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Printable version | Sep 23, 2021 6:23:36 AM |

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