New Delhi: The International Monetary Fund has warned India against the economic slowdown that has significant effect on the nation's economy and has asked for urgent action to be taken.
The IMF has said that India should take steps quickly to reverse the economic slowdown as the country's economy has been one of the engines of global growth, but declining consumption and investment and falling tax revenue combined with other factors have put a break on one of the fastest growing economies in the world.
In its annual review, the IMF has warned India stating that it is the fastest growing economy in the world and recent situations are not in favour of the country. "India is now in the midst of a significant economic slowdown," Ranil Salgado of the IMF Asia and Pacific department stated. He also said that 'the current downturn and returning India to a high growth path requires urgent policy actions'.
The IMF has said that India's Central Bank RBI has 'room to cut the policy rate further, especially if the economic slowdown continues.'The fund has, however, warned that the government has limited space to boost spending to support growth. IMF chief economist Gita Gopinath has also said that the IMF is set to significantly downgrade its growth estimates for the Indian economy. Those estimates will be released next month.
It is to be mentioned that the IMF had held its forecast for 2019 by nearly 6.1 % while cutting the outlook for 2020 to 7% in October last.Talking about the Indian economy RBI has cut the key lending rate five times in 2019 to a 9 year low. RBI, however, had kept the policy unchanged in its last meeting of the policy review but has lost its annual growth forecast to 5% from 6.1%, stating consumer demand and manufacturing activity contracts are reason for this.
India's economy has grown at its slowest pace in more than six years in the July to September period and the IMF has suggested the government need to bring reinvigorate and Reform agenda. The suggestion also says that the government should restore the health of the financial sector and work towards enhancing its ability to provide credit to the economy.