India in the midst of significant slowdown:IMF

News:The International Monetary Fund (IMF) has released its consultations

report on India.


Key takeaways from the report:

  • The report has said that India’s rapid economic expansion in recent years has lifted millions of people out of poverty. 
  • However in 2019, a combination of factors led to subdued economic growth in India.
  • India is now in the midst of a significant economic slowdown.Hence,the report has urged the government to take urgent policy actions to address the current prolonged downturn.
  • The slowdown is mostly cyclical and not structural.However,still concerns remain as because of the financial sector issues,the recovery will be not as quick as it is in case of cyclical slowdowns.

Reasons for growth slowdown:

  • The current economic slowdown is attributed to abrupt reduction in non-banking financial companies’ credit expansion and weak income growth especially in rural areas which has been affecting private consumption.
  • Private investment has also been hindered by financial sector difficulties (including in public sector banks) and insufficient business confidence. 
  • Further,the implementation issues with important structural reforms such as the nation-wide Goods and Services Tax may also have played a role.

Positives from the report:

  • India is still doing well in terms of other economic parameters such as Foreign exchange Reserves which have risen to a record level.
  • The current account deficit has also narrowed down.
  • Inflation although witnessing a temporary hike because of vegetable prices has been under control for the last few years.

Additional information:

International Monetary Fund

  • The International Monetary Fund (IMF) is an organization of 189 countries. It was established in 1945.
  • The main goal of IMF is to ensure the stability of the international monetary system. 
  • It also seeks to facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.