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‘India To Be $4Tn Economy By FY25, Not $5 Tn’

Gita Gopinath, the International Monetary Fund's (IMF) Chief Economist

In 2019, India ‘s Prime Minister Narendra Modi had set a $5 trillion target, reports Asian Lite News

India is unlikely to become a $5 trillion economy by 2024-25, but will be worth about $4 trillion, Gita Gopinath, the International Monetary Fund’s (IMF) Chief Economist, has estimated, according to a Fortune India report.

Earlier, Prime Minister Narendra Modi had set the $5 trillion target in 2019.

“India has significant potential for rapid growth over the medium term given its young population, large labour force, and rising educational attainment”, though “there remain certain structural impediments that need to be addressed to harness this potential,” Gopinath told Fortune India.
She said there is a need for increased public expenditure in infrastructure, education, health and social safety nets.

Prime Minister Narendra Modi

“But for this to happen greater fiscal space is needed. This can be enhanced through a credible and communicated medium-term fiscal consolidation strategy that includes additional revenue mobilization and advancement of the authorities’ privatisation agenda,” she said.

Last week, the IMF had released a flagship report that showed India continuing to be the world’s fastest growing major economy clocking a growth rate of 9.5 per cent this fiscal year and 8.5 per cent in the next.

The IMF’s World Economic Outlook (WEO) report kept the gross domestic product (GDP) growth projections it had made in July while India was in the grip of Covid-19’s second wave and had cut by 3 per cent its forecast of 12.5 per cent made in April before the pandemic’s resurgence.

Briefing reporters at the release of the report in Washington, Gopinath said: “India, came out of a very, very tough second wave and that led to a big downgrade in July but we have no change.”

“India is doing well in terms of vaccination rates and that’s certainly helpful,” she said. India does, however, face many challenges, she noted.

India
India’s FInance Minister Nirmala Sitharaman

“As of now, you know there are many challenges that the Indian economy always does face with regard to the financial market, with regard to the fact that the virus has not gone yet,” Gopinath said.

Asked if the large fiscal deficit in India was a major concern, Malhar Nabar, the Deputy Division Chief in IMF Research Department, said that while a medium-term strategy was needed to bring it down, it was still possible to meet the pressures from any future pandemic upsurge.

“We think that there’s still room to provide more support if needed, if the pandemic takes a turn for the worse, and to provide it in a targeted manner to the worst affected households and firms,” he said.

“But going forward over the medium term, it would be important to put in place, credible, medium term strategy to bring down the debt to GDP ratio and create space to meet the future development needs and infrastructure needs,” he added.

Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman

The WEO said that India’s Covid-battered economy had shrunk by 7.3 per cent in the last fiscal year.

Its long-term forecast for India’s GDP growth is 6.1 per cent in 2026.

In the WEO tables, China followed India with eight per cent this year and 5.6 per cent the next — a reduction of 0.1 per cent for both years from the forecast made in July.

The UK came next with 6.8 per cent growth this year, followed by France at 6.5 per cent, and the US at six per cent.

The global economy is projected to grow 5.9 per cent in 2021 and 4.9 per cent in 2022 — 0.1 percentage point lower for 2021 than in the July forecast.

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IMF chief acquitted of charges favouring China

IMF Chief

Georgieva, a Bulgarian economist who joined the IMF in 2019, had been hounded by allegations that while she was the World Bank’s Chief Executive…reports Arul Louis

The Executive Board has cleared International Monetary Fund’s (IMF) chief Kristalina Georgieva of allegations that she manipulated a World Bank report to favour China while she was its CEO.

The exoneration of Georgieva, who is the IMF Managing Director, was announced on Monday night as the annual meetings of the two organisations got underway in Washington.

The IMF said: “Having looked at all the evidence presented, the executive board reaffirms its full confidence in the Managing Director’s leadership and ability to continue to effectively carry out her duties.”

The board trusts in her “commitment to maintaining the highest standards of governance and integrity in the IMF”, it added.

Surjit Singh Bhalla of India is a member of the 24-member executive board.

The US went along with the decision of the board but displayed a measure of scepticism.

Treasury Secretary Janet Yellen said the law firm’s inquiry raises “legitimate issues and concerns” but “absent further direct evidence with regard to the role of the Managing Director there is not a basis for a change in IMF leadership”.

Georgieva, a Bulgarian economist who joined the IMF in 2019, had been hounded by allegations that while she was the World Bank’s Chief Executive she had, along with other officials, pressured the staff to improve China’s standing in its “Doing Business 2018”.

An independent inquiry conducted by a law firm, WilmerHale, for the Bank’s ethics committee asserted that Georgieva and another official asked staff to modify “China’s data points” in order to raise its standing in ease of doing business tally while the Bank wanted Beijing to support its quest for a capital increase.

In her rebuttal, she said the report made “false and spurious insinuations”, and blamed the office of Jim Kong Kim, the American doctor who was the Bank’s president at that time, of the manipulation.

She said that she had in fact made efforts to prevent Hong Kong’s data from being added to China’s.

After the executive board’s decision taken after eight sessions during which it held discussions with her and the law firm, Georgieva said: “I want to express my unyielding support for the independence and integrity of institutions such as the World Bank and IMF; and my respect for all those committed to protecting the values on which these organiSations are founded.”

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Lebanon and IMF to resume talks for int’l support

Lebanon and IMF to resume talks for int’l support

Lebanon remains fully committed to engaging in a constructive, transparent and equitable debt restructuring process with all other stakeholders…reports Asian Lite News

Lebanon has resumed talks with the International Monetary Fund (IMF), seeking a recovery program with international support, the Finance Ministry said in a statement.

The statement issued on Monday said that Lebanon remains fully committed to engaging in a constructive, transparent and equitable debt restructuring process with all other stakeholders, reports Xinhua news agency.

Prime Minister Najib Mikati

“The government reiterates its commitment to a fair and comprehensive solution for all creditors and will engage, with the support of its financial and legal advisors, in good faith discussions with all its creditors as early as possible,” it added.

The Lebanese cabinet formed the team in charge of negotiating with the IMF under the leadership of Deputy Prime Minister Saade Chami and including Finance Minister Youssef el-Khalil, Economy and Trade Minister Amin Salam, and Central Bank Governor Riad Salameh.

Lebanon has been going through an unprecedented financial crisis with the local currency depreciating by over 90 per cent, limiting people’s ability to afford their basic needs.

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The country’s social stability started deteriorating since the October 2019 uprising, adding to it is the economic impact of Covid-19 and the deadly Port of Beirut explosions in August 2020.

Moreover, the failure to form an effective government to implement much-needed financial reforms accelerated the deterioration of the socioeconomic situation by resulting in the collapse of the Lebanese pound and an increase in annual inflation by 158 per cent with food inflation going up by 550 per cent.

The country’s poverty rate is currently hovering over 78 per cent.

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-Top News China Economy

China-linked probe weakens IMF chief’s authority?

The ranking that she is accused of pressuring staff to improve is that of China, a magnet for criticism in Washington over everything from trade to geopolitics…reports Asian Lite News

Kristalina Georgieva risks seeing her authority as head of the International Monetary Fund (IMF) undermined just weeks before an annual meeting of global finance chiefs after being accused of influencing a report in Chinas favour when she worked at the World Bank, Bloomberg reported.

The substance of the charge, putting “undue pressure” on World Bank staff to adjust the rating in the “Doing Business” report when she served as chief executive officer,was the latest in a series of scandals that have plagued the troubled report in recent years.

So beleaguered, subjective and controversial is the methodology for the report, which measures the ease and transparency of operating in an economy, that the World Bank announced it will stop producing it, the report added.

The ranking that she is accused of pressuring staff to improve is that of China, a magnet for criticism in Washington over everything from trade to geopolitics.

The US Treasury Department sees the accusations as serious and is “analysing the report”.

The Department said the US holds veto power over major IMF and World Bank decisions.

Republican lawmakers could use the issue to renew criticism of an expansion in IMF resources under Georgieva’s leadership.

Representative French Hill, an Arkansas Republican and one of the most outspoken Congressional critics of last month’s IMF reserves issuance, said that the report raises serious questions about Georgieva’s motivations during her time at the World Bank, Bloomberg said.

Justin Sandefur, a senior fellow and World Bank watcher at the Center for Global Development, a think-tank, said the report could end up affecting her relationship with IMF members.

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‘IMF’s tariff hike demand could worsen Pak inflation’

Pakistan has promised the IMF to increase taxes by 1.272 trillion PKR and raise electricity tariff by almost 5 PKR per unit…reports Asian Lite News

Pakistan’s Finance Minister Shaukat Tarin said that the demand by the International Monetary Fund (IMF) to hike electricity tariff to release more funds could lead to further inflation in the country.

It is unfair to push Pakistan to increase its electricity tariff as it will only affect the country’s economy negatively, Tarin said during a meeting of the National Assembly’s sub-committee on finance on Monday.

While hinting at reviewing the program with the IMF, the Minister said Pakistan has assured the lender of reducing circular debt, but the demand of increasing electricity tariff is not understandable, reports Xinhua news agency.

If the GDP growth is not increased by at least 5 per cent, the country will be facing serious crisis in next several years, the Minister said, adding that the growth rate will only improve if the economy is moving swiftly, with special focus on agriculture and industries.

He said the government has been working toward broadening the tax net, but could not force people to pay more taxes under the current scenario.

Pakistan has promised the IMF to increase taxes by 1.272 trillion PKR and raise electricity tariff by almost 5 PKR per unit, according to local media.

Meanwhile, Pakistan has suspended the entry of pedestrians from Afghanistan and Iran through land border terminals for over two weeks from May 5 in an effort to curb the spread of Covid-19.

The revised land border management policy will be implemented till May 20 and applicable only to inbound pedestrians without effect on existing cargo or trade movement, Xinhua news agency reported citing the notification as saying.

Pakistani nationals in Afghanistan and Iran will be allowed to return, said the notification, adding that extreme medical emergency cases and funerals of Afghan nationals will also be exempted “as per procedure in vogue”.

Border terminals will remain open for seven days a week while employment strength of the law enforcement agencies and health staff at border terminals will be increased for implementation of testing protocols and to control high traffic density.

Also read:Pakistan to produce China’s vaccine

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UN lauds IMF, World Bank measures to stave off debt crisis

The top UN official has proposed a “three-phased approach to address debt burdens: a debt standstill, targeted debt relief for the most vulnerable, and a reform of the international debt architecture.”..reports Asian Lite News.

Every nation in the world is trying reemerge as the global leaders in post Covid-19 world economy. United Nations Secretary-General Antonio Guterres welcomed the steps announced by the International Monetary and Finance Committee (IMFC) and the World Bank Group Development Committee to address debt crises and other financial distress to economies arising from the Covid-19 pandemic.

In a statement issued via his spokesperson on Friday, the UN chief said developing economies had struggled to secure enough financial resources to cope with the onset of the coronavirus crisis, “let alone to recover from it”, Xinhua news agency reported.

Since the beginning of the crisis, the secretary-general has called for liquidity, the statement continued, through a large issuance of Special Drawing Rights (SDRs) – an instrument created by the International Monetary Fund to help supplement cash reserves – for those most in need, and a reallocation of unused SDRs.

The top UN official has proposed a “three-phased approach to address debt burdens: a debt standstill, targeted debt relief for the most vulnerable, and a reform of the international debt architecture.”

The secretary-general welcomed the IMF committee’s “concrete calls” for a new allocation of SDRs, and voluntary reallocations to countries in need. He said he was encouraged by the support given for the Debt Service Suspension Initiative (DSSI), which has provided 5 billion U.S. dollars in temporary relief for vulnerable countries, and for the Common Framework for Debt Treatments, agreed by the G20 economies.

“Debt standstills and relief must be extended to countries that need it most – including middle income countries, which are home to more than 60 percent of the world’s poor – without creating stigma or compromising their sovereign ratings,” said the statement.

Reforming the international debt architecture is also critical, said the UN chief, noting that a debt crisis amidst the Covid-19 emergency “would put the Sustainable Development Goals out of reach.”

Gita Gopinath, International Monetary Fund (IMF) chief economist. (Xinhua/Jorge Villegas/IANS)

This week’s discussions on the international debt architecture are a major step in the right direction, he added.

The secretary-general called on all countries and institutions to join in a global effort to “rethink the principles underpinning today’s debt architecture, and urged action to “complement existing instruments with more effective debt crisis resolution mechanisms.”

He expressed great encouragement over the IMF’s and World Bank’s emphasis on a sustainable, inclusive, smart and green recovery.

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Indian economy to grow at historic 12.5%, says IMF

Figures released by IMF Chief Economist Gita Gopinath reveal that India has regained its status as the world’s fastest growing economy, reports Arul Louis.

India’s economy is projected to grow at the historically high level of 12.5 per cent this fiscal year, but the International Monetary Fund’s (IMF) Chief Economist Gita Gopinath cautioned that the current wave of the pandemic “is quite concerning.”

The growth projection was raised on the basis of “evidence we were getting in the last couple of months in terms of the normalisation of economic activity,” she said at the release of the World Economic Outlook (WEO) report in Washington.

“These numbers precede the current wave of the virus, which is quite concerning,” she added.

With the unprecedented growth rate projection of 12.5 per cent not seen in modern times, India also regains its status as the world’s fastest growing economy, according to the WEO.

Malhar Nabar, the Division Chief in IMF’s Research Department, said, “The current forecast that we have already takes a fairly conservative view on the sequential growth for the Indian economy for this year.”

“But it’s true that with this very worrying uptick in (COVID-19) cases that poses very severe downside risks to the growth outlook for the economy,” he added.

The WEO projected India’s gross domestic product (GDP) growth to moderate to 6.9 per cent in next fiscal year, while still retaining the top growth rate spot.

Any elation over the historically high rate is, however, moderated by the fact of India’s negative growth rate of 8 per cent during 2020-21.

The growth rate projection for 2021-22 is 1 per cent higher than the 11.5 per cent projection made by the IMF in January and 5.1 per cent more than the 7.4 per cent in April last year.

The previous highest GDP growth rate in modern times for India was recorded in 2010 at 10.3 per cent, and the records before that were 9.8 per cent set in 2007 and 9.6 in 1988, according to IMF data.

The IMF growth rate projection for India is nearly in line with the 12.6 per cent from the Organization for Economic Cooperation and Development (OECD) last month.

Gopinath struck a note of optimism for the world economy, which was projected by the IMF to grow by 6 per cent this year, an increase of 0.5 per cent from the January figure.

She wrote in a foreword to the WEO, “Even with high uncertainty about the path of the pandemic, a way out of this health and economic crisis is increasingly visible.”

“Adaptation to pandemic life has enabled the global economy to do well despite subdued overall mobility, leading to a stronger-than-anticipated rebound, on average, across regions,” she added.

However, she also warned, “A high degree of uncertainty surrounds these projections, with many possible downside and upside risks. Much still depends on the race between the virus and vaccines. Greater progress with vaccinations can uplift the forecast, while new virus variants that evade vaccines can lead to a sharp downgrade.”

India’s projected growth rate is 4.1 per cent higher than that for China, which ranks next with 8.4 per cent.

But China was the only major economy to have a positive growth last year of 2.3 per cent, while the rest of the world was in the red.

The global economy shrank by 3.3 per cent last year.

Advanced economies are projected to grow by 5.1 per cent after a 4.7 per cent dip last year.

Within that group the US is projected to be the best performer with a 6.4 per cent growth next year after a 3.5 per cent shrinkage last year. That is the highest growth for the US since 1984 when it recorded 7.2 per cent.

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‘India to be world’s fastest-growing economy’

India’s gross domestic product (GDP) growth is projected to moderate to 6.9 per cent next fiscal year, while still retaining the top growth rate spot…reports Asian Lite News

Emerging from the Covid-19 disruptions, India’s economic growth is projected to reach the historically high level of 12.5 per cent this fiscal year and also regain its status as the world’s fastest-growing economy, the International Monetary Fund (IMF) reported on Tuesday.

India’s gross domestic product (GDP) growth is projected to moderate to 6.9 per cent next fiscal year, while still retaining the top growth rate spot, according to the World Economic Outlook (WEO) released by the IMF in Washington.

The high growth rate not seen in modern times is, however, moderated by the fact of India’s negative growth rate of 8 per cent during 2020-21.

It was made before the latest new wave of rising Covid-19 cases in India and is predicated on there being no lockdowns or serious disruptions.

The 12.5 per cent growth rate for 2021-22 is 1 per cent higher than the 11.5 per cent projection made by the IMF in January and 5.1 per cent more than the 7.4 per cent in April last year.

The previous highest GDP growth rate in modern times for India was recorded in 2010 at 10.3 per cent, and the records before that were 9.8 per cent set in 2007 and 9.6 in 1988, according to IMF data.

The IMF growth rate projection for India is nearly in line with the 12.6 per cent from the Organisation for Economic Cooperation and Development (OECD) with 37 member nations, although it was a tad lower.

IMF’s Chief Economist Gita Gopinath struck a note of optimism for the world economy, which was projected by the IMF to grow by 6 per cent this year, an increase of 0.5 per cent from the January figure.

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She wrote in a foreword to the WEO: “Even with high uncertainty about the path of the pandemic, a way out of this health and economic crisis is increasingly visible.”

“Adaptation to pandemic life has enabled the global economy to do well despite subdued overall mobility, leading to a stronger-than-anticipated rebound, on average, across regions,” she added.

However, she also warned: “A high degree of uncertainty surrounds these projections, with many possible downside and upside risks. Much still depends on the race between the virus and vaccines. Greater progress with vaccinations can uplift the forecast, while new virus variants that evade vaccines can lead to a sharp downgrade.”

Latest World Economic Outlook(ians)

India’s projected growth rate is 4.1 per cent higher than that for China, which ranks next with 8.4 per cent.

But China was the only major economy to have a positive growth last year of 2.3 per cent, while the rest of the world was in the red.

The global economy shrank by 3.3 per cent last year.

Advanced economies are projected to grow by 5.1 per cent after a 4.7 per cent dip last year.

Within that group the US is projected to be the best performer with a 6.4 per cent growth next year after a 3.5 per cent shrinkage last year. That is the highest growth for the US since 1984 when it recorded 7.2 per cent.

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