United Nations, Oct 15 — Despite the energy shocks, India's growth projection has been raised because it has responded well to the challenges and its “strong fundamentals”, “fiscal prudence”, and lots of reserves, the International Monetary Fund's (IMF) official for the Asia region said on Thursday.
Explaining the IMF raising India's growth projection from 6.5 per cent in April to 7 per cent in its latest report despite the energy shock from the Iran war, Krishna Srinivasan, director of the International Monetary Fund's Asia and Pacific Department, said, “We've revised up growth because Q1 (first quarter) of this fiscal year came out much stronger than we had anticipated”.
“India entered this (phase of energy shock) with very strong fundamentals; growth was strong, fiscal prudence was pretty much enshrined”, he said. “They had lots of reserves and so on.”
“In that context, you know, they have responded well to the shock,” he said at a news conference in Bangkok, where the IMF is holding its annual meeting.
He was asked about the “disconnect between growth and performance” seen in the rupee being under pressure, the weakening investment inflows, and higher oil price risks, against the highest growth rate among major economies.
“The so-called disconnect is not really (a) disconnect because what happens to the exchange rate is a function of global interest rates, investor risk appetite, and oil prices”, Srinivasan said. “And India, being an oil importer, has been affected by the energy shock”.
But “the exchange rate should not be viewed as a barometer of economic success or failure, given the multiplicity of shocks we have seen”, he said.
“Exchange rate should be, you know, the first recourse in terms of allowing the exchange rate to meet as a buffer for to respond to shocks [and it] is very important”, he added.
Srinivasan supported the revision of the GDP methodology undertaken this year by the Ministry of Statistics and Programme Implementation (MoSPI), calling it a “welcome development”.
“There's always room for improvement, but let's recognise the good work done by MoSPI in proving GDP statistics”, he said.
“These revisions to the methodology are entirely consistent with the advice we've been giving them, including from our statistics department”, he said. “So, I would just say that, in terms of GDP numbers, what they have done is consistent with good practices”.
“They have revised the base, they rebased it, and they've used the PPI (Producer Price Index) and IIP (Index of Industrial Production) to revise the production side of GDP, and these are welcome developments”, he said.