IMF
said that India is quite likely to witness a fall in its overall economy growth
rate. The fall will be larger than what the experts have expected earlier.
According to International Monetary Fund (IMF) in 2012-13 India’s growth rate
will be at 5.4%, which should rise up to at least 6% in the next fiscal.
On Wednesday IMF has released its annual country report and its
consultations on India. In that press conference, the IMF spokesman said, “In
2011-12, India’s growth rate was 6.5%. That figure is expected to drop to 5.4%
in 2012-13. Despite the poor outlook for the global economy, this is a far
larger drop than might be expected,”
It has to
be mentioned here that India had maintained quite an impressive growth rate
average of 8.3% in the period of 2004 to 2011. So this will be a substantial
drop for India from its previous year’s performances.
Last month
the current UPA Government has also revised downward the economic growth for
fiscal 2011-12 to 6.2%. The earlier estimation of the growth rate of that
period was 6.5%, so obviously India’ economy is beating the expectations in a
negative manner. The IMF executive Board Directors said in its report that
India’s growth rate slowed drastically because of the cyclical and structural
factors, while inflation remains at elevated levels.
The IMF said the common response to
slow growth is the use of counter cyclical fiscal or monetary policy, but in
India’s case this rule is inappropriate. It added that the high inflation rate
simply means that there is a little room to reduce interest rates, while fiscal
deficit of India means that controlling, rather than raising, spending is a
main priority as per now.
The government has already taken some major steps to deal with the
current scenario. It has already moved to lower fuel subsidies, which basically
benefits the richer people on a long run. It will need to do more to free
sufficient resources for 12th Plan priorities, including a
comprehensive reform of fuel subsidies, the IMF concluded.
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