Amid the wide range of commentary on India’s ongoing slowdown, IMF, the global lender, has said that the growth slowdown in India is temporary and the country will pick up momentum very soon.
There has been an enormous debate on the ongoing slowdown in the country for the last few months. It ranges from the people terming it as structural to people arguing cyclical one, and there are few nuanced voices which called it a combination of both. From the optimism of IMF, it seems that, the global lender sees it as cyclical slowdown, and therefore, expects a recovery very soon.
“We had a downgrade in one large market India but we believe that’s temporary. We expect momentum to improve further going ahead. There are also some bright spots like Indonesia and Vietnam,” said IMF chief Kristalina Georgieva.
The IMF has revised its global growth projection from the World Economic Outlook of October 2019. The global growth is expected to pick up to 3.3 percent in 2020 and 3.4 percent in 2021, from 3.4 percent in 2019.
It is evident that, the economic growth of India has slowed down considerably, and the country is estimated to grow at 5 percent in real terms in FY 20. In 2018, India grew at 6.8 per cent compared 6.6 per cent growth posted by China. In the ongoing calendar year, India is estimated to grow at 5 per cent, as per the CSO estimate while China grew at 6 percent in 2019. Therefore, China has once again overtaken India as the fastest growing major economy of the world.
However, in the 2020, India is expected to grow at 7 percent while China will grow at 5.8 percent, 1.2 percentage points ahead of China.
IMF is optimistic about the Indian economy and it vindicates that the ongoing ‘growth recession’ is temporary, triggered by cyclical factors. Indian economy will lead the global growth in next year, and other developing countries (minus China) would assist it.
The policy analysts, economists and corporate houses around the globe have given very positive reviews about the economic policies of the Modi government. Two of the most important economic reforms have been in the fields of indirect taxation and the insolvency process. The GST was waiting for implementation in the policy corridors for almost three decades, as the previous governments could not bring all the stakeholders together to implement the uniform indirect taxation. But the Modi government has been able to build consensus for the implementation of GST in one of the most complex markets around the world. GST has helped increase the number of indirect as well as direct taxpayers. Top economists have predicted that GST will improve the GDP growth of the country by 1-2 per cent.
Similarly, the IBC is solving the bad loans crisis of Indian economy, which has slowed down the credit for the past decade. Given the structural reforms in the Indian economy, the long term prospects look better as compared to ongoing pessimistic environment.