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  3. IMF Chief applauds India’s effort to cap subsidies

IMF Chief applauds India’s effort to cap subsidies

21 Mar 2012 Evaluate

IMF has applauded the Finance Minister’s efforts towards fiscal consolidation by capping subsidies at 2% of GDP in the Union Budget. This has come in as quite a surprise at a time when the budget is facing criticism for not taking bold initiatives to pursue economic reforms and is being termed as ‘a lost opportunity’.  The credit rating agency Moody’s too has given a ‘credit negative’ outlook to the economy, post the budget.

As per the International Monetary Fund (IMF) Managing Director Christine Lagarde, the decision of the Indian government to cap subsidies at 2% of GDP, is a solid anchoring of the role of subsidies and is encouraging as it confirms the governments continued efforts towards fiscal consolidation. The determination to improve the tax code shown in the Budget has also been appreciated by Lagarde.

The IMF chief has also described India's expected growth rate of 7% next year as ‘significant’. Referring to the global economic scenario, Lagarde has observed that the global situation is improving and the world economy is better placed than what it was three months ago. However, disruptions in supply of oil from Iran can push global crude prices up by 30%, that too at a time when the price is already hovering at $125 a barrel.

IMF has appreciated the continued interest in encouraging capital investment to address bottlenecks in infrastructure, especially in power sector and is also keen to see an increase in FDI investments in India. 

IMF has been playing an important role in the Indian economy by providing assistance from time to time. It has also been providing consultancy in the determination of various policies of India. The multilateral agency is also keen on implementing quota reforms that will provide more voting rights for emerging economies like India and China. The move will lift large emerging powers like India, Brazil and Russia into the top 10 of the 187-member institution.

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