IMF recalibrating India's growth forecast is 'gross under estimation': N K Singh

The IMF’s decision to lower India’s potential growth prediction to 6%, citing the coronavirus pandemic, is a “gross underestimation,” according to N K Singh, Chairman of the 15th Finance Commission. Singh also noted that measuring the growth potential is always challenging as per a report in the Business Standard.

He also stated there was a need to ensure that individuals who had overcome poverty did not go back into it due to exogenous reasons such as the pandemic, he told while speaking at a virtual discussion on ‘Financing For Development’ organised by the Institute for Studies in Industrial Development (ISID).

“The IMF’s recalibration of our medium-term growth potential from 6.25 percent to 6 percent last week, in my opinion, is grossly underestimating our medium-term growth potential.”

“Growth potential calculations are always challenging,” he remarked.

The International Monetary Fund (IMF) lowered India’s potential growth prediction to 6% last week, citing the pandemic as the reason.

According to him, India’s growth will be 9.5% in the fiscal year 2021-22 and 8.5% in the fiscal year 2022-23, reflecting base effects and robust global growth.

The pace of growth which an economy can sustain over the medium term without causing additional inflation is referred to as potential growth.

Singh, who is also the President of the Institute of Economic Growth, stated that India’s tax ratio needed to be raised from a macroeconomic and redistributive standpoint, as well as increased fiscal flexibility for funding public expenditures.

Singh described the implementation of the Goods and Services Tax (GST) as a “game-changing reform,” adding that recent revenue data indicated that the GST is generating a positive revenue share.