India’s Growth Rate ‘Much Weaker Than Expected’, International Monetary Fund Sounds Alarm Bell Again

The International Monetary Fund (IMF) on Thursday once again expressed that India’s growth rate might be ‘much weaker’ than expected due to the ‘weak’ non-banking financial sector and corporates and environmental regulatory uncertainty.

“Again, we will have a fresh set of numbers coming up, but the recent economic growth in India is much weaker than expected, mainly due to corporate and environmental regulatory uncertainty and lingering weakness in some non-bank financial companies and risks to the outlook are tilted to the downside,” IMF spokesman Gerry Rice told reporters at a news conference.

A slump in manufacturing and a consistent downfall in consumption has resulted in GDP growth slowing down to a six-year low of 5 per cent in the June quarter of the current financial year. Previously the lowest GDP growth rate of 4.3 per cent was registered in March 2013.

Several international agencies including the IMF have revised India’s growth figures in the past three months. In June the International Monetary Fund (IMF) had cut the GDP forecast to 7 per cent from 7.3 projected earlier, while the Reserve Bank of India too revised the GDP growth figures for 2019-20 to 6.9 per cent from its June forecast of 7 per cent.

Dr Manmohan Singh’s 5 Remedies

Former Prime Minister and RBI Governor, Dr Manmohan Singh, had recently criticised the government for the economic slowdown. He said the government implemented the GST in a hasty manner and called Demonetisation a manmade blunder.

On Thursday, Singh criticised the government’s ambition of making India a $5-trillion economy by 2024 is a ‘pipe dream’. He also suggested the government five remedies to revive the economy and advised the BJP to take the help of the Congress’ manifesto.

1) Singh said that despite the revenue loss for a brief period the government should reduce the GST rates and make it ‘logical’.

2) The government should boost rural consumption and revive the agriculture sector. Singh cited the Congress manifesto, which laid down several measures to free up the agriculture market and said the government can take points from it.

3) Talking on the ‘weak’ non-banking financial sector, the former finance minister said that the liquidity crisis needed to be addressed as not only public sector banks, but NBFCs were also suffering.

4) Addressing the labour intensive core manufacturing industries’ concern, Singh suggested reviving major job-generating sectors such as textile, auto, electronics and subsidised housing. He also said easy loans needed to be provided for this purpose, especially to MSMEs.

5) Singh stated that the government needed to identify new export markets opening up due to the ongoing trade war between the US and China.

Singh also advised the government to come out of ‘headline management’. “The Modi government should come out of the habit of headline management. Already a lot of time is wasted. Instead of making sectoral announcements, efforts should be made now to simultaneously take forward the entire economic framework,” Singh said in an interview to Dainik Bhaskar.

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