India’s top economic adviser on IMF growth slowdown


Traffic jam on Delhi-Meerut highway, July 29, 2021 in Ghaziabad, India.

Sakib Ali | Hindustan Times | Getty Images

India’s top economic adviser Krishnamurthy Subramanian has taken on the International Monetary Fund to reduce the country’s growth projection, saying it is “significantly out of the mark”.

Last week, the IMF reduced India’s growth outlook to 9.5% for the fiscal year ended March 2022 – it is 3% lower than the April forecast of 12.5%. In an accompanying report, the IMF said India’s prospects have been dashed after a severe second wave of Covid-19 outbreaks and a “slow recovery expected in confidence from that contrast”.

Speaking Monday on CNBC’s “Street Signs Asia,” Subramanian said the IMF’s assessment was guided by “salient bias” – where more attention is given to impressive information while data that is relatively less noticeable is ignored. . He said India did not agree with the downgrade.

“Our projections were not as high as the soybeans, nor do we think the revision would be justified,” Subramanian said of the 3% downgrade size. “I would say the IMF is significantly off the mark.”

The expectations of the Indian government are more in line with the Reserve Bank of India, which revised its projected growth rate from 1% to 9.5% in June, he added.

To be clear, both the RBI and the IMF now have the same growth projection for India – the fund previously had a higher projection rate of 12.5% ​​growth compared to the bank’s 10.5%. central.

Impact of India’s second wave

The economic impact of the second wave is unlikely to be as great as the first, according to Subramanian.

He cited three reasons for this assessment: First, the duration of the second wave was relatively shorter than the previous focus.


Cases peaked at record levels between late March and early May during the second wave – in the first wave, daily infections picked up by mid-June last year and culminated in September. However, the total number of cases reported each day during the second wave was significantly higher than the first wave.

Second, most of Covid’s closures were conducted at the state level, as opposed to the first wave last year where India closed most of the country for several months.

The blocks this year “were asynchronous in time and heterogeneous in their intensity,” Subramanian said. He added that neither essential goods nor interstate movements have been so severely affected, which will further reduce the economic impact.

For the fiscal year ended March 31, The Indian economy contracted by 7.3%.

At a virtual industry conference last month, Subramanian said India is expected to grow between 6.5% and 7% by fiscal 2023 onwards.

Some economists say there are already early signs of improving economic activity as restrictions were eased once the second wave of cases culminated in early May.

Kunal Kundu of the General Society, however, warned in a note last week that the emerging green shoots in India are “still irregular at this stage”. With the recovery not yet in full swing, and a third wave of infections looming on the horizon, India’s growth trajectory needs to be “carefully nurtured,” Kundu said.

Inflation will be tied to the range

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