Just hours ahead of the Union budget, International Monetary Fund (IMF) Managing Director Kristalina Georgieva has said that India has experienced an abrupt slowdown in 2019 due to major reforms such as GST and demonetization; however the economy is not in a recession and is expected to set on an upward trajectory in 2020 and 2021.
"The Indian economy indeed has experienced an abrupt slowdown in 2019. We had to revise our growth projections, downwards to four percent for last year. We are expecting 5.8 percent (growth rate) in 2020 and then an upward trajectory to 6.5 percent in 2021," Georgieva told a group of foreign journalists on Friday.
"It appears that the main reason for this slowdown was the non-banking financial institutions experiencing turbulence," she said on the eve of Union Finance Minister Nirmala Sitharaman presenting the annual budget in Parliament.
"For example, coming with the unified tax system (GST), and the demonetization that took place. These are steps that over time are beneficial, but of course, they might be somewhat disruptive over the short term," Georgieva said in response to a question.
She said India had undertaken some important reforms that over the longer term would be beneficial for the country, but they do have some short-term impact.
Georgieva said that the current economic slowdown cannot be described as a recession. "No, you're far from that. But it is a significant slowdown, not the recession," she said.
The IMF director has also cautioned about the slump in consumption which led to the overall slowdown in the economy, the IMF is keen on India’s corrective action to get sound macroeconomic fundamentals in order to achieve a better growth trajectory.
The government will present the Union Budget 2020-2021 on Saturday, February 1. The first phase of the session will conclude on February 11, while the second part of the session will begin from March 2 and end on April 3. The budget session started on January 31 with the government presenting the economic survey which gave an overview of how the economy fared in 2019. The Indian economy gained a lead ahead of the UK and France to gain fifth position in terms of GDP.
According to the economic survey 2020, the Indian economy managed to weather the global slowdown, faring better than the BRICS nations such as Brazil, Russia, South Africa and is on par with China. The Economic Survey projects a higher GDP growth rate for India in the 2020-21 fiscal than the IMF does.