India should maintain the scaled-up vaccination momentum, continue with policy accommodation until the recovery is fully entrenched and accelerate structural reforms while keeping public debt vulnerabilities in check, the International Monetary Fund has said.
In its annual Article IV consultation report released on Friday, the IMF said fiscal support underpinned by targeted spending on social protection, employment support and health spending is warranted until the recovery is secure. It said maintaining accommodative monetary policy remained appropriate, although elevated inflation pressures needed to be closely monitored.
“Looking ahead, a well-communicated plan for a gradual reduction in monetary policy support as the recovery strengthens would foster orderly market transitions,” it said.
The IMF has projected India’s growth for FY22 at 9.5% and FY23 at 8.5%, making it the fastest growing major economy.
The statement flagged the impact of the Covid19 pandemic on the economy. “A persistent negative impact of Covid-19 on investment, human capital, and other growth drivers could prolong the recovery and impact medium-term growth,” it said, adding that the economic outlook remained clouded due to pandemic-related uncertainties contributing to both downside and upside risks.
It said faster vaccination and better therapeutics could help contain the spread and limit the impact of the pandemic and noted that implementation of the recently announced wide-ranging structural reforms could increase India’s growth potential.Internet Explorer Channel Network