The International Monetary Fund (IMF) on Thursday said though India has worked on the fundamentals but there are problems that need to be addressed. IMF Managing Director Kristalina Georgieva said that the Centre’s move to consolidate banks will address some of these issues.
“India has worked on the fundamentals (of its economy), but there are problems to be addressed. In the financial sector, especially non-banking institutions, there are steps taken now to consolidate banks. They ought to help resolve some of these issues,” Kristalina Georgieva told reporters at a news conference in Washington.
On August 30, finance minister Nirmala Sitharaman announced mega-mergers of ten state-run banks into four bigger banks, a week after announcing a raft of measures to boost economic growth and improve investor sentiment.
The merger was announced with an aim to unleash greater efficiencies and latent strength in India’s banking sector with an eye on realising government’s $5 Trillion economy dream.
The IMF on Tuesday slashed India’s growth projection for the country to 6.1% for the current fiscal from its July forecast of 7%. This is a second downward revision in seven months and in total 120 basis points reduction. 100 basis points are equal to one percentage point.
The IMF, in its biannual World Economic Outlook, urged India to d opt for further monetary policy easing and broad-based structural reforms to reverse a cyclical demand slowdown.
Kristalina Georgieva also stressed upon the need to continue investing in human capital and “continue bringing women in the labour force”.
“In India, what is critically important is to continue with addressing the long-term drivers of growth. Investment in human capital in India is a top priority. It has to continue bringing women in the labour force. It is very important. India has very talented women, but they stay at home,” she said.
Georgieva said there has been “a very strong growth” in India over the last years and the IMF is projecting reasonably strong growth for the country.
However, “like the rest of the world, India is experiencing a slowdown. So slightly over six per cent is what we expect to see in 2019”, she said. “Structural reforms are a priority for India. We expect to see those reforms continue,” Georgieva said in response to a question.