IMF lauds India for its fiscal discipline

Washington: The International Monetary Fund has applauded India for maintaining fiscal discipline in an election year, saying that the Indian economy is doing well and continues to be the world’s bright spot.

“At this point in time, India’s economy is doing well. Growth at 6.8 per cent is very good. Inflation’s coming down. We have to make sure that inflation comes down to target and it is there on a durable basis. Macro fundamentals look pretty good,” Krishna Srinivasan, Director, Asia and Pacific Department, at the IMF said in an interview.

“One thing I would say is that maintaining fiscal discipline, especially in the election year, for me, has been quite a highlight because countries do embark on fiscal adventures in the election year. This government has maintained a discipline, I think, is very important because at the end of the day, sound macro fundamentals are the basis on which countries prosper and have durable growth. So that’s very important to maintain that,” Srinivasan said.

India, he said, has successfully navigated multiple shocks over the last several years. It’s emerging to be one of the fastest major economies in the world. “In fact, for this year, for 2024-25, we project growth at 6.8 per cent led by private consumption and public investment. Inflation is coming down gradually. It’s now below 5 per cent,” he said.

“If you look at the macro fundamentals, they’re pretty solid, despite this being an election year, the government has adhered to fiscal discipline. You look at the reserve position, it’s strong. If you look at overall macro fundamentals, it’s pretty good,” he said, adding that risks to the economy are broadly balanced.

According to the Reserve Bank of India (RBI), India’s forex reserves jumped by $2.98 billion to a fresh peak of $648.562 billion for the week ended April 5. In the previous reporting week, the forex kitty had increased by $2.951 billion to $645.583 billion, which was an all-time high.

“In the short-term, an important risk is volatile commodity prices with various tensions... But going beyond the short-term, you could think in terms of weather-related shocks, fragmentation, all these are things to worry about in terms of risks to the outlook.

“Of course, there are also risks to the upside when I say private consumption could be stronger. The impact from CapEx spending in India could be stronger with more crowding in the private investment. So those are upside risks. In a nutshell, India has a sweet spot at this point in time,” the IMF official said.