India must keep its fiscal deficit in check: Gita Gopinath

It is significant for India to keep its fiscal deficit under monitoring, despite the positive projections pertaining to its revenue, said Gita Gopinath, Chief Economist, International Monetary Fund (IMF).

As against India’s real growth rate of 6.8 percent in 2018, the IMF in its latest World Economic Outlook, released on Tuesday, projected the country’s growth rate at 6.1 percent in 2019 and also said that the Indian economy is expected to grow at 7 percent in 2020.

In India’s case, there has been a negative impression on growth that is contributed due to financial fragilities, liquidity crunch in the non-bank financial sector, and the impact on consumer borrowing and borrowing of small and medium enterprises, Gopinath said.

Gopinath was speaking about the Indian economy at the annual meeting of the IMF and the World Bank.

Talking about the projections regarding India in the World Economic Outlook report, Gopinath said suitable steps have been taken.

Praising the recent steps being taken by the Union Finance Minister Nirmala Sitharaman for addressing the economic challenges being faced by India, she said that there is a need to do a lot more.

Most important ones of the steps are needed to be taken are keeping the balance sheets of commercial banks in order, said Gopinath.

“In our projections, we have that India will recover to 7 per cent growth in 2020. And the premise is that these particular bottlenecks will clear up,” she said.

Talking about the fiscal side for India, she said that there have been some recent steps, including the corporate tax cut. But there has not been an announcement about how that will be offset to revenues at this point, Gopinath said.

“It looks optimistic, the revenue projections going forward. But it is important for India to keep the fiscal deficit in check,” she said.

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