- IMF chief praised India's 'bold' economic and institutional reforms at a meeting of global finacial leaders
- Kristalina Georgieva praised the digital identity system (i.e., Aadhaar) the revision of income and GST slabs
- IMF predicted India will grow at 6.5 per cent in 2025 and 2026, against the RBI's forecast of 6.8 per cent
International Monetary Fund chief Kristalina Georgieva praised India's 'bold economic and structural reforms' - from revised direct and indirect tax laws to the mass rollout of a digital payments ecosystem and the conceptualisation and integration of a digital social identity (i.e., the Aadhaar) - on the first day of the global financial body's semi-annual gathering of finance ministers and central bank governors
"I'm very big on India because of the boldness of their reforms. For example, everyone told India that digital identity on a mass scale could not be done... but India proved them wrong," she said Monday.
Among the big-ticket 'bold' reforms Georgieva was referring to was the recalibration of Goods and Services Tax brackets in September. The government approved sweeping reforms that included dropping the 12 per cent and 28 per cent slabs and introducing a 40 per cent 'sin tax'.
The change, the government had said, would boost domestic consumption by making a myriad items, including daily essentials like ghee, milk, paneer, butter, coffee, and roti, much cheaper.
The government has also overhauled income tax slabs and re-written tax laws.
The praise builds on more positive comments from last week, when she called the economy a 'key growth engine' within the context of a global economy still recovering from the pandemic.
The global growth forecast is roughly three per cent over the medium term - down from 3.7 per cent pre-pandemic, she had said. "... global growth patterns have been changing... with China decelerating steadily while India develops into a key growth engine," the IMF boss had said.
As of July data, the IMF predicts 6.5 per cent growth for India in 2025 and '26.
The Reserve Bank of India, however, was more optimistic. In October RBI Governor Sanjay Malhotra said the federal bank had raised its projection to 6.8 per cent based on implementation of growth-inducing structural reforms, including streamlining GST brackets.
The Indian economy received special praise. The G20, however, did not; the IMF boss said she would continue to push it to focus on persistent debt issues burdening developing economies.
"Growth is slow, debt is high and the risks of financial downturn are ... there," she said, adding the IMF continues to work with the World Bank to look at countries with liquidity issues.
Last week she said global public debt is expected to cross 100 per cent of GDP by 2029.
The concern for the here-and-now, meanwhile, is that already some 150 developing countries are either unable to make debt repayments or are rapidly nearing that threshold.
She also said the IMF continues to work with the World Bank to help countries with severe liquidity problems, in addition to trying to keep debt issues on the radar at the G20.
These comments are critical for the immediate future. The current chair of the G20 is South Africa, which has made debt sustainability a key issue. The next chair, however, is the United States, and President Donald Trump has made not signalled any great interest in this topic.
Georgieva also underscored potential uncertainties - arising from the impact of the US outrageous trade tariffs - in the global economy for 2025 that she had flagged back in January.
Her remarks this morning came against the backdrop of renewed US-China trade tension.
Last week, China unveiled new export restrictions on critical minerals and the US President Donald Trump responded with a '100 per cent tariff' threat and risked triggering a full trade war.
That would sabotage a truce crafted by Washington and Beijing over the past five months that reduced tariffs from triple-digit levels and prompted the IMF to upgrades its global growth outlook. IMF officials, past and present, have called for 'sanity' to prevail in this situation.
"If Trump goes back to 100% tariffs on Chinese goods, there's going to be a lot of pain in the markets for him," Martin Muehleisen, a former IMF strategist, told news agency Reuters.
With input from agencies
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