25 December, 2019
Syllabus subtopic: Important International institutions, agencies and fora, their structure, mandate.
Prelims and Mains focus: about the remarks made in IMF’s report on India’s economic slowdown and ways to address it; about IMF, its structure and mandate
News: India is now in the midst of a significant economic slowdown, the International Monetary Fund (IMF) has said, urging the government to take urgent policy actions to address the current prolonged downturn.
Remarks made in IMF’s report
Growth in the second quarter of FY 201920 came in at a sixyear low of 4.5% (yearonyear), and the composition of growth indicates that private domestic demand expanded by only 1% in the quarter. Most highfrequency indicators suggest that weak economic activity has continued into December.
Reason : The abrupt reduction in nonbanking financial companies’ credit expansion and the associated broadbased tightening of credit conditions appears to be an important factor and weak income growth, especially rural, has been affecting private consumption. Private investment has been hindered by financial sector difficulties (including in public sector banks) and insufficient business confidence. Some implementation issues with important and appropriate structural reforms, such as the nationwide Goods and Services Tax, may also have played a role.
By other measures, India still is doing well:
Therefore, by other measures, India is doing quite well. The issue is primarily how to address the growth slowdown. The IMF had been taken by surprise by India’s slowdown though this slowdown cannot be described as an economic crisis. The short term, the most critical thing is carrying out reforms in the financial sector.
Source: The Hindu
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