This Article is From Oct 20, 2019

To Remove Inequality In India, Spend More On Education, Health: IMF Chief

The IMF chief economist said that inequality is a big issue not just in India but other countries as well.

India should first think about the many other ways to reduce inequality, said Gita Gopinath


  • Government spending needs to be targeted well, says IMF's Gita Gopinath
  • Corporate tax rate cut a move in right direction, the top economist adds
  • IMF has lowered its forecasts for growth in India to 6.1% in 2019

Inequality could be removed from India by spending more on education and health, International Monetary Fund (IMF) Chief Economist Gita Gopinath told NDTV in an exclusive interview in the US. "At times, government spends a lot but it is not well targeted. Subsidies used are not well targeted. You can improve not just the amount of spending but also its effectiveness," said Gita Gopinath, days after the IMF cut its forecasts for growth in India to 6.1 per cent in 2019 (from 7.0 per cent) and 7.0 in the next year (from 7.2 per cent).

Asked whether the rich should be taxed more, the top economist said, "India should first think about the many other ways to reduce inequality through better education and health for people. More spending on these could help in reducing inequality." Inequality is a big issue not just in India but other countries as well, she added.

Ms Gopinath said she believes the corporate tax rate cut announced by Finance Minister Nirmala Sitharaman last month was a move in the right direction. 

"The recent corporate tax cuts and recent policies to help rural income growth, all of these should help with recovery," Ms Gopinath told NDTV.

In September, the Finance Minister announced tax cuts for corporates by 10-12 per cent to 25.17 per cent, a move that would cost the government Rs 1.45 lakh crore this fiscal year. The reduction in corporate taxes one among a range of announcements to push consumer demand and revive growth.

Ms Gopinath further said that the IMF has projected the Indian economy to recover to 7 per cent in 2020, after an estimated 6.1 per cent this year. "It's a little less optimistic than we were a few months ago. It's down from our previous forecast," she said.

GDP or gross domestic product growth stood at a more than six-year low of 5 per cent in the June quarter.

However, the IMF still estimates India to retain its rank as the world's fastest-growing major economy tying with China. 

The IMF has said that the downward revision from its April projection "reflects a weaker-than-expected outlook for domestic demand".