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IMF Director for the Asia and Pacific Department Anoop Singh believes economic growth in India will “recover significantly next year”.
His statement came days after the IMF’s World Economic Outlook report revised India’s 2013 annual growth rate from 5.7 to 3.75 per cent citing inflation, weak demand and a downward trend in manufacturing and services.
Speaking to reporters on the sidelines of the IMF’s annual meeting in Washington, Singh said that the Indian government’s recent bevy of monetary and market policies could fuel a growth rate of at least 4.5 per cent next year.
The Indian economy suffered shortly after outgoing US Federal Reserve Chairman Ben Bernanke said last May that Washington would gradually cancel its bond-buying scheme to boost the local economy – a process also known as quantitative easing.
The Indian rupee plummeted to all-time lows against the greenback in August as foreign investors pulled out their investments leading to foreign capital outflow.
The Indian Finance Ministry took a number of measures, including restricting overseas investment, banning the import of gold coins, and reducing interest rates to boost domestic investment and growth.
It also raised the repo rate – or rate at which the Reserve Bank of India (RBI) during times of spiraling inflation lends money to commercial banks, which may have experienced a lack of sufficient funds.
On Friday, RBI Governor Raghuram Rajan told his counterparts at the IMF meeting in Washington that his country’s economy was not in crisis, as some have forecast, and that it was not in need of assistance from the world financial body for at least the next five years.
Citing Delhi’s strategic reserves of $280 billion, Rajan said that India is able to pay back it’s short-term debt, which currently lies at 66 per cent of GDP, while external debt is at 22 per cent of GDP and reserves at 15 per cent of GDP.
Rajan, who served as the IMF’s chief economist from 2003 to 2007, also disputed the body’s revised growth forecast.
“We have our own discussions with the Fund whether those estimates are right. I think we could be a little stronger than the World Economic Outlook suggests. I also think that the current account deficit would be significantly smaller than what they suggest,” he said.