According to the International Monetary Fund (IMF), Indian economy is recovering to its potential growth rate at 6.75 to 7 percent. IMF’s Senior Resident Representative Thomas J Richardson has said that increasing investment over the past few months is providing impetus to economy and potential growth rate could go up over time. However, the IMF does not see any immediate V-shaped recovery for India.
T J Richardson further stated that India need to contain high inflation, which has been impeding the business sentiments in the country. To strengthen economic growth, India should continue to gradually bring down the fiscal deficit and usher in fuel subsidy reforms. Further, IMF’s Official said that it is important for India to continue the gradual process of bringing down fiscal deficit which will help reduce vulnerability to external shocks and make India more durable for international investors as well as for domestic investors. India’s fiscal deficit is likely to contain at 4.5 percent of GDP in the financial year 14, as compared to 4.89 percent of GDP in the FY13. T J Richardson suggested that in order to bring down the fiscal deficit, India’s government should implement subsidy reform in a way that it would not aggressively affect growth and broaden the tax base without adversely affecting business climate.
The IMF has projected the Indian economy’s growth at 5.4 percent in the current financial year and pick up to 6.3 percent in the next fiscal. Presently, India's economic growth stayed below 5 percent for the second year in a row at 4.7 percent during FY14. The factors like high interest rates, low investments and slow execution of infrastructure projects have been impacting economy’s growth.
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