Extremely Worrying Signs: IMF Calls India To Take 'Urgent' Steps To Lift Dwindling Economy

Over the past few weeks, everything else has taken a backseat. From the politicians to streets, colleges, media, social media, and even friendship circles have been dominated by two things - the Citizenship Amendment Act and The National Register of Citizens.

Those in support of CAA and NRC are going to any lengths to defend the government's move and will argue how important it is for the country, while those against will say how it is against the spirit of the Indian constitution and how it is targeting one community.

Meanwhile, there are others who say, why are we wasting a lot of time discussing this, when there are other pressing issues in the country that needs the urgent attention of the policymakers. Now the International Monetary Fund (IMF) has just done that.

On Monday the IMF urged the India government to take steps quickly to reverse the economic slowdown of an economy that has been one of the engines of global growth. Declining consumption and investment, and falling tax revenue, have combined with other factors to put the brakes on one of the fastest-growing economies in the world, the IMF said in its annual review.

After lifting millions out of poverty ¡°India is now in the midst of a significant economic slowdown,¡± Ranil Salgado, of the IMF Asia and Pacific Department, told reporters. ¡°Addressing the current downturn and returning India to a high growth path requires urgent policy actions.¡±

However, the government has limited space to boost spending to support growth, especially given high debt levels and interest payments, the fund warned IMF chief economist Gita Gopinath last week said India¡¯s slowdown had ¡°surprised to the downside,¡± and said the fund is set to significantly downgrade its growth estimates for the Indian economy in the World Economic Outlook which will be released next month.

The IMF in October slashed its forecast for 2019 by nearly a full point to 6.1 per cent, while cutting the outlook for 2020 to 7.0 per cent. Salgado said India¡¯s central bank has ¡°room to cut the policy rate further, especially if the economic slowdown continues.¡± The Reserve Bank of India (RBI) cut the key lending rate five times this year to a nine-year low, but at its last meeting, earlier this month defied expectations by keeping policy unchanged.

The central bank slashed its annual growth forecast to 5 per cent from 6.1 per cent, as consumer demand and manufacturing activity contracts. India¡¯s economy grew at its slowest pace in more than six years in the July-September period, down to 4.5 per cent from 7.0 per cent a year ago, according to government data. Salgado said ¡°the government needs to reinvigorate the reform agenda,¡± including restoring the health of the financial sector in order to ¡°enhance its ability to provide credit to the economy.¡±

The Indian economy has been in doldrums for some time, but the government had for long refused to acknowledge it and made all kinds of claims like movies running in Housefull theatres is proof that there was no slowdown. One minister even said that do not go by the numbers.

But eventually, the government was forced to admit everything was not well with the economy. Finance Minister Nirmala Sitharaman told the Rajya Sabha last month that the Indian economy may have slowed down but there is no threat of a recession. Last week, Prime Minister, while speaking at an ASSOCHAM event reassured investors about recovering from the slowdown. ¡°India has witnessed such ups and downs previously as well,¡± Modi said adding that ¡°And each time, we have emerged even stronger.

That¡¯s why even now India will forge its path ahead with firmer determination and confidence.¡± Earlier, Home Minister Amit Shah had blamed the global slowdown for the slow growth of the Indian economy.