International Monetary Fund’s Chief Economist Gita Gopinath on Sunday told NDTV that the international organisation was “a little less optimistic” about the Indian economy “than we were a few months ago”.
Last week, the world body lowered India’s projected growth in the current financial year to 6.1% for this year but added that it would rebound to 7% in the 2020-’21 financial year. Gopinath concurred with the assessment.
The economist said India suffered on multiple fronts this year. “We think of this [slowdown] as a cyclical downturn,” she added. Gopinath highlighted the weakness in rural demand, problems with the non-banking financial sector, and the “regulatory uncertainties” in the auto and real estate sectors. “These factors have led to weakness in the domestic economy, both on investment and consumption,” the 47-year-old added.
In its report, the IMF had said the economy decelerated further in the second quarter because of “sector-specific weaknesses”.
Gopinath said Union Finance Minister Nirmala Sitharaman’s decision to cut corporate taxes from 35% to 22% would have a positive impact on investment. “The recent corporate tax cuts and recent policies to help rural income growth, all of these should help with recovery,” she added.
Asked if the 6.1% growth projection was an overestimate, Gopinath said: “We think these are the numbers that will play out.”
The revised projections have come at a time when the economy is facing a sustained decline in growth. Gross Domestic Product growth rate slipped to a six-year low of 5% in the April-June quarter – the fourth straight quarter of slowdown.
On Thursday, the IMF said India had worked on the fundamental aspects of its economy but needs to focus on long-term drivers of growth. The global organisation said India would have to focus on structural reforms as well as including more women in its workforce.
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