IMF slashes India’s potential GDP forecast by 25 bps to 6%

[Ryzen_renoir]

NEW DELHI : The International Monetary Fund (IMF) on Monday said it has pared down India’s potential growth forecast by 25 basis points to 6% due to the impact of the pandemic which hit investments and labour market badly. 

Potential growth is the rate of growth that an economy can sustain over the medium term without generating excess inflation. 

“We think the impact (of the pandemic) is coming from the capital accumulation channel. Investment took a big hit, that means capital stock is somewhat lower than it would have been otherwise. Then of course there is some damage to the labour market. So, we have reduced potential growth (of India) by 25 basis points to 6%," Alfred Schipke, Mission Chief for India at the IMF said in a virtual media interaction. 

Schipke however said if the government fully implements structural reforms, moves forward with its privatization plan, then that could be an upside to IMF’s own potential growth projection. “We know from experience of other countries that implementing important structural reforms takes time. So, the key is to implement it fully," he added. 

Jarkko Turunen, Deputy Division Chief at Asia and Pacific Department of IMF highlighted the human capital component in the labour market distortion caused by the pandemic. “We have seen reduced access to education and training due to the pandemic and would expect that would weigh on human capital growth looking forward. This would have an adverse impact on labour markets and potential output. This is quite important to address," he added.    

In the Article IV consultation report on India released on Friday, IMF said a persistent negative impact of covid-19 on investment, human capital, and other growth drivers could prolong the recovery and impact medium-term growth.   

Finance minister Nirmala Sitharaman last week said India can maintain 7.5-8.5% growth for the next decade given India’s investment attractiveness and demographic dividend. “We are looking at close to double digit growth this year and this would be the highest in the world. For the next year, on the basis of this year, growth would definitely be somewhere in the range of 7.5-8.5%. I expect that to be sustained for next decade because the rate at which action in core industries are happening, rate at which services are growing, I don’t see a reason for India to be anywhere lesser than that in the next coming decade," Sitharaman said while participating in a conversation with former US treasury secretary Larry Summers at the Harvard Kennedy School.     

[Sword_KanthaRao]

Oh by 2027, 6% uh..!!! 

Any growth above 7% is way too dangerous for slow responsive nation like India.

We have seen it in the past. Actually stable 6% growth for a decade is much more prosperous than 8% and then dip to 6%.

[kingcasanova]

5 yr long run lo ayithe ok, but there are lot of factors that affect meanwhile, and above all the world institutions have started giving numbers in favour of so can't trust these numbers 

[Ryzen_renoir]

29 minutes ago, Sword_KanthaRao said:

Oh by 2027, 6% uh..!!! 

Any growth above 7% is way too dangerous for slow responsive nation like India.

We have seen it in the past. Actually stable 6% growth for a decade is much more prosperous than 8% and then dip to 6%.

2021 , 2022 numbers are only high because of the disastrous rebound from 2020 .

GDP of india in 2019 Nov > gdp of india in 2021 Nov 

6% growth does not even cover inflation , sanka naaki chesthunaru. If the current team doesn't change india will be painfully close to stagflation territory

[DummyVariable]

Ilantivi enni articles chudaledhu. Tomorrow there will be another article showing some other number. Lite.

Modi winning again. 

[Sword_KanthaRao]

23 minutes ago, Ryzen_renoir said:

2021 , 2022 numbers are only high because of the disastrous rebound from 2020 .

GDP of india in 2019 Nov > gdp of india in 2021 Nov 

6% growth does not even cover inflation , sanka naaki chesthunaru. If the current team doesn't change india will be painfully close to stagflation territory

High growth period was followed by lower growth numbers. Loo at 2008-2010..2014-2016 and then 2017-2019.

Higher growth will also lead to hyper inflation. India is presently going through this phase and re-bound growth of 9.5% is projected. 
 

Its better if India grows at steady pace. Ideally 6% average per decade.