India has the potential to grow at 7% annually, says IMF official

Our Bureau New Delhi | Updated on November 25, 2017

Thomas Richardson

But sees no V-shaped recovery for now

The International Monetary Fund (IMF) sees the Indian economy recovering to a potential growth of 6.75 per cent to 7 per cent. However, the fund does not see any immediate V-shaped recovery, a top official of the multilateral institution said.

The potential growth rate could go up over time as investment continues, said Thomas Richardson, Senior Resident Representative of the IMF, at an Assocham event in the Capital on Wednesday.

The IMF’s current forecast for India’s GDP growth for 2014-15 is 5.4 per cent, rising to 6.3 per cent in 2015-16. The next review is expected in July.

“We have to be realistic. We have to give the Indian Government some more time to get growth going. It is not going to be a turnaround immediately. It will take time (for growth to surge),” Richardson said.

General optimism

He also highlighted that growth was picking up globally and that the external environment was positive.

The IMF’s optimism on India’s potential comes on the heels of the World Bank’s 5.5-per cent growth projection for 2014-15 and 6.3 per cent for 2015-16. It also came a day after the OECD, a club of rich nations, said in a report that India was poised to return to faster growth, while its BRIC peers Brazil, China and Russia are expected to record below-trend growth rates. Richardson said bringing inflation down was important to set the stage for longer-term growth. He supported the RBI’s move to increase the weightage of the consumer price index (CPI) in focusing on monetary policy objectives.

Targeting inflation

There is also a need to discuss and debate inflation targeting, he added.

In addition, India needs to squarely address the issue of fuel subsidies, which are regressive and anti-poor, said the IMF official, adding that there was also a need to reinvigorate the fiscal responsibility and budget management process.

Published on June 11, 2014

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