The International Monetary Fund holds bilateral discussions with its members usually every year. On the basis of the consultations with various experts and after analysing the economic data, they come out with their staff report. What political parties and their representatives normally say depends on where they stand - whether in Opposition or in government. I am, therefore, reproducing in the words of the IMF, the summary of what they had to say about India in January-February, 2014, that is the last few months of the UPA government, and now in July-August, 2018. What is contained below is a reproduction of the IMF report:


Key Issues 

Context: The tightening of global liquidity has increased external pressures and heightened the focus on India's macroeconomic imbalances (high inflation, large current account and fiscal deficits) and structural weaknesses (particularly supply bottlenecks in infrastructure, power and mining). 

Outlook and risks: Growth is expected to slow down to 4.6% this fiscal year, the lowest level in a decade, reflecting global developments and domestic supply constraints. Headline CPI inflation is expected to remain near double digits for the remainder of the fiscal year. The current account deficit is narrowing, driven by a significant improvement in exports, robust remittance flows, and a rapid diminution of gold imports. Nonetheless, India has very little room to adopt countercyclical policies, constrained by persistently-high inflation, and sizeable fiscal and external imbalances. Spillovers from renewed external pressures interacting with domestic vulnerabilities are the principal risks. 

Key policy recommendations: 

1. High and persistent inflation is a key macroeconomic challenge facing India. Further increases in the policy rate will be necessary to tackle high inflation and inflation expectations. 

2. If external pressures from global financial market volatility resume, rupee flexibility should be the first line of defence, complimented by the use of reserves, increases in short-term interest rates, actions on the fiscal front, and further easing of constraints on capital inflows. 

3. Further fiscal consolidation is needed. Tax and subsidy reforms will be required to durably lower fiscal imbalances. 

4. Enhanced financial sector supervision, better monitoring of banks' credit quality, and improved information on corporate vulnerabilities will be needed as a basis for tackling rising corporate and financial sector strains. 

5. Addressing supply bottlenecks and structural challenges — particularly in the agriculture and power sectors, and in the pricing and allocation of natural resources (including coal, natural gas, and fertilizers) — will be essential to achieve faster growth, job creation and poverty reduction.


Stability-oriented macroeconomic policies and progress on structural reforms continue to bear fruit. Following disruptions related to the November 2016 currency exchange initiative and the July 2017 goods and service tax (GST) rollout, growth slowed down to 6.7% in 2017-18, but a recovery is underway led by an investment pickup. 

Headline inflation averaged 3.6% in 2017-18, a 17-year low, reflecting low food prices on a return to normal monsoon rainfall, agriculture sector reforms, subdued domestic demand, and currency appreciation. With demand recovering and rising oil prices, medium-term headline inflation has risen to 4.9% in May 2018, above the mid-point of the Reserve Bank of India (RBI)'s headline inflation target band of 4% ± 2%. 

External vulnerabilities remain contained but have risen. The current account deficit (CAD) widened to 1.9% of GDP in 2017-18, on rising imports and oil prices. Gross international reserves rose to $424.5 billion (about eight months of prospective imports of goods and services) at the end of March 2018, but declined to $407.8 billion in the third week of June 2018. 

Persistently-high household inflation expectations and large general government fiscal deficits and debt remain key macroeconomic challenges. Systemic macrofinancial risks persist, as the weak credit cycle could impair growth and the sovereign-bank nexus has created vulnerabilities. 

The near-term macroeconomic outlook is broadly favourable. Growth is forecast to rise to 7.3% in 2018-19 and 7.5% in 2019-20, on strengthening investment and robust private consumption. 

Headline inflation is projected to rise to 5.2% in 2018-19, as demand conditions tighten, along with the recent depreciation of the rupee and higher oil prices, housing rent allowances, and agricultural minimum support prices. 

The current account deficit is projected to widen further to 2.6% of GDP on rising oil prices and strong demand for imports, offset by a slight increase in remittances. 

As inflation pressures have risen, monetary policy was tightened in early June 2018. Fiscal consolidation is expected to resume. 

Under Article IV of the IMF's Articles of Agreement, the IMF holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country's economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the executive board. The 2018-19 Union budget deficit target is 3.3% of GDP (equivalent to 3.6% of GDP in IMF terms). 

Financial sector reforms have been undertaken to address the twin balance sheet problems, as well as to revive bank credit and enhance the efficiency of credit provision by accelerating the cleanup of bank and corporate balance sheets. Over the medium term, the outlook will continue to improve with growth expected to rise to 7¾ %, and macro-financial and structural policies are priorities to help boost inclusive growth and harness the demographic dividend. 

Economic risks are tilted to the downside. On the external side, risks include a further increase in international oil prices, tighter global financial conditions, a retreat from cross-border integration including spillover risks from a global trade conflict, and rising regional geopolitical tensions. Domestic risks pertain to tax revenue shortfalls related to continued GST implementation issues and delays in addressing the twin balance sheet problems and other structural reforms.


An analysis of what the IMF had to say in 2014 as against 2018 is very clear — high inflation, high fiscal deficit, high current account deficit, a standstill infrastructure, power sector, allocation of natural resources. We have come a long way. The past four years have seen a series of reforms, both legislative and otherwise, which have been carried out by the government. The system has been substantially cleaned up and made more transparent. Decisiveness has led to easier decision-making, which has made the economy stand out from several other countries. I would urge all to read these two reports, the copy of which are now publically available.