Gita Gopinath on Indian economy: These are the IMF chief economist's top tips on fighting slowdown
Extra

Gita Gopinath on Indian economy: These are the IMF chief economist’s top tips on fighting slowdown

In conversation with India Today News Director Rahul Kanwal at the 50th annual meeting of the World Economic Forum (WEF) in Davos, Gita Gopinath spelt out how India can come out of the economic slump.

As the International Monetary Fund slashed India’s economic growth forecast to 4.8 per cent for the current fiscal year, IMF chief economist Gita Gopinath said that all is not lost for the Indian economy.

In conversation with India Today News Director Rahul Kanwal at the 50th annual meeting of the World Economic Forum (WEF) in Davos, Gita Gopinath spelt out how India can come out of the economic slump.

Gita Gopinath said growth in India slowed sharply owing to stress in the non-bank financial sector and weak rural income growth.

Speaking about the road to recovery for India’s economy, Gita Gopinath said, “We see India recovering. There is a significant recovery coming in the next fiscal year. There is a fair amount of monetary stimulus in the system, corporate tax cuts are also there — these should help with recovery in growth.”

India’s growth is estimated at 4.8 per cent in 2019, projected to improve to 5.8 per cent in 2020 and 6.5 per cent in 2021 (1.2 and 0.9 percentage point lower than in the October WEO), supported by the monetary and fiscal stimulus as well as subdued oil prices.

According to Gopinath, the biggest task before the government is to restimulate growth without furthering the non-performing assets (NPAs) problem.

“The most major issue to address is the weakness in credit growth. There need to be policies that can resuscitate credit growth but at the same time don’t create further NPA problems, that is the first step. There needs to be a quicker recapitalisation of banks,” she said.ADVERTISEMENT

However, she added that India also needs strong governance reforms.

The International Monetary Fund (IMF) on Monday lowered growth estimate for the world economy to 2.9 per cent for 2019, citing “negative surprises” in a few emerging market economies, especially India.

When asked the extent to which the economic slowdown in India had impacted global forecasts, Gita Gopinath said, “Simple calculation says it would be over 80 per cent.”

Gopinath also said the pickup in global growth for 2020 remains highly uncertain as it relies on improved growth outcomes for stressed economies like Argentina, Iran and Turkey, and for underperforming emerging and developing economies such as Brazil, India and Mexico.