Skip to main content

IMF retains economic growth projection for India at 7.3% for FY19

Echoes RBI on exchange rate intervention, but differs on rate tightening
The International Monetary Fund (IMF) on Monday retained economic growth projection for India at 7.3 per cent for 2018-19 (FY19), lower than the government’s and the Reserve Bank of India’s (RBI’s) forecasts. This is, however, noteworthy as the IMF cut global growth projections by 0.2 percentage points. In its World Economic Outlook (WEO), the IMF said foreign exchange interventions should be limited to address disorderly market conditions, something which RBI Governor Urjit Patel also talked about. The IMF wants the RBI to tighten monetary conditions, something which it did not do in the October policy review. For the next year (FY20), the IMF lowered India’s growth projections by 0.1 percentage points to 7.4 per cent.
As such, the IMF does not see India’s growth reaching 7.5 per cent even in FY19. However, the RBI pegged India’s growth projections at 7.5 per cent. The government expected the rate to exceed 7.5 per cent this year on the back of 8.2 per cent growth rate in the first quarter. India’s economy grew 6.7 per cent in FY18. India will continue to be the fastest-growing major economy as China’s growth projection was retained by the IMF at 6.6 per cent for FY19. For FY20, the Chinese economic growth rate was cut by 0.2 percentage points to 6.2 per cent. The IMF releases its annual WEO ahead of its meeting with the World Bank. This year, the meeting is being hosted in Bali, Indonesia, since Friday.
The IMF said its forecast for investment growth for FY19 is weaker than in April, despite higher capital spending in India, on account of contracting investment in economies under stress, such as Argentina and Turkey, which is also reflected in a downward revision for import growth. Acceleration in the growth rate from 2017-18 reflects a rebound from transitory shocks (the currency exchange initiative and implementation of the goods and services tax), with strengthening investment and robust private consumption, the IMF said. India’s medium-term growth prospects remain strong at 7.75 per cent, benefitting from ongoing structural reform, but have been marked down by just under 0.5 percentage point relative to the April 2018 WEO, the IMF said.
It said reform priorities in India include reviving bank credit and enhancing the efficiency of credit provision by accelerating the clean-up of bank and corporate balance sheets and improving the governance of public sector banks. It also said renewed impetus to reform labour and land markets, along with further improvements to the business climate, are crucial. The IMF talked about continued capital outflows from emerging market economies and pressure on exchange rates because of monetary normalisation in the US. “Under floating exchange rate regimes, foreign exchange interventions should be limited to addressing disorderly market conditions while protecting reserve buffers,” it said.
On monetary policy, the IMF said it should be tightened to anchor expectations where inflation is expected to pick up, say in India. It said core inflation (excluding all food and energy items) in India had risen to about 6 per cent as a result of a narrowing output gap and pass-through effects from higher energy prices and exchange rate depreciation. The IMF said a high interest burden and risks from rising yields in India also require continued focus on debt reduction to establish policy credibility and build buffers.
The Business Standard,09th October 2018

Comments

Popular posts from this blog

New income tax slab and rates for new tax regime FY 2023-24 (AY 2024-25) announced in Budget 2023

  Basic exemption limit has been hiked to Rs.3 lakh from Rs 2.5 currently under the new income tax regime in Budget 2023. Further, the income tax slabs in the new tax regime has been changed. According to the announcement, 5 income tax slabs will be there in FY 2023-24, from 6 income tax slabs currently. A rebate under Section 87A has been enhanced under the new tax regime; from the current income level of Rs.5 lakh to Rs.7 lakh. Thus, individuals opting for the new income tax regime and having an income up to Rs.7 lakh will not pay any taxes   The income tax slabs under the new income tax regime will now be as follows: Rs 0 to Rs 3 lakh - 0% tax rate Rs 3 lakh to 6 lakh - 5% Rs 6 lakh to 9 lakh - 10% Rs 9 lakh to Rs 12 lakh - 15% Rs 12 lakh to Rs 15 lakh - 20% Above Rs 15 lakh - 30%   The revised Income tax slabs under new tax regime for FY 2023-24 (AY 2024-25)   Income tax slabs under new tax regime Income tax rates under new tax regime O to Rs 3 lakh 0 Rs 3 lakh to Rs 6 lakh 5% Rs 6

Jaitley plans to cut MSME tax rate to 25%

Income tax for companies with annual turnover up to ?50 crore has been reduced to 25% from 30% in order to make Micro, Small and Medium Enterprises (MSME) companies more viable and also to encourage firms to migrate to a company format. This move will benefit 96% or 6.67 lakh of the 6.94 lakh companies filing returns of lower taxation and make MSME sector more competitive as compared with large companies. However, bigger firms have shown their disappointment since the proposal for reducing tax rates was to make Indian firms competitive globally and it is the large firms that are competing globally. The Finance Minister foregone revenue estimate of Rs 7,200 crore per annum for this for this measure. Besides, the Finance Minister refrained from removing or reducing Minimum Alternate Tax (MAT), a popular demand from India Inc., but provided a higher period of 15 years for carry forward of future credit claims, instead of the existing 10-year period. “It is not practical to rem

Don't forget to verify your income tax return in August: Here's the process

  An ITR return needs to be verified within 120 days of filing of tax return. Now that you have filed your income tax return, remember to verify it because your return filing process is not complete unless you do so. The CBDT has reduced the time limit of ITR verification to 30 days (from 120 days) from the date of return submission. The new rule is applicable for the returns filed online on or after 1st August 2022. E-verification is the most convenient and instant method for verifying your ITR. However, if you prefer not to e-verify, you have the option to verify it by sending a physical copy of the ITR-V. Taxpayers who filed returns by July 31, 2023 but forget to verify their tax returns, will get the following email from the tax department, as per ClearTax. If your ITR is not verified within 30 days of e-filing, it will be considered invalid, and may be liable to pay a Late Fee. Aadhaar OTP | EVC through bank account | EVC through Demat account | Sending duly signed ITR-V through s