IMF surprised about recent quarter slump in Indian economy

We see the Indian economy rebounding from our projected 6.1 pc growth this fiscal year to something like 7 pc in the next fiscal. We see factors that will support growth, including monetary policy stimulus, working their way through the pipeline, Jonathan Ostry, Deputy Director, APAC Department at the IMF, said.

Recent tax cuts, government’s progress in addressing weaknesses in the financial sector and measures to support growth sectors as seen as factors underpinning growth in the near term, Ostry said.

Talking about the slowdown in Indian economy in recent quarters, he said: indeed (it) took many of us by surprise, including the IMF.

“There wasn’t a single cause for the slowdown there were many different causes at work including corporate and regulatory environmental uncertainties, the stresses in the non-bank financial sector, (and) stresses in the rural sector, among others,” he said.

Asked about the Regional Comprehensive Economic Partnership (RECP), which India is reportedly cautious to sign as the multi-lateral trade pact negotiations are widely expected to be concluded in the coming months, he underlined the importance of having services included in the free-trade partnership agreement.

Much greater attention to integration type issues is essential to sustain growth in south Asia, he said.