India’s chief economic advisor hits back at IMF downgrade, says it’s ‘significantly off the mark’

India’s chief economic advisor Krishnamurthy Subramanian hit back at the International Monetary Fund for downgrading the country’s growth projection, saying it’s “significantly off the mark.” The IMF last week cut India’s growth outlook to 9.5% for the fiscal year ending in March 2022 — that’s 3% lower than its April forecast of 12.5%. In an accompanying report, the IMF said India’s prospects were downgraded following a severe second wave of Covid-19 outbreak and an “expected slow recovery in confidence from that setback.”

Speaking to CNBC’s “Street Signs Asia” on Monday, Subramanian claimed the IMF’s assessment was driven by “saliency bias” — where more focus is given to striking information while data that is comparatively less remarkable is ignored. He said India did not agree with the downgrade. The Indian government’s expectations are more in line with the Reserve Bank of India, which revised down its projected growth rate by 1% to 9.5% in June, he added. To be clear, both the RBI and the IMF now have the same growth projection for India — the fund previously had a higher projection rate of 12.5% growth compared to the central bank’s 10.5%.

For the fiscal year that ended on March 31, India’s economy contracted by 7.3%. Rising prices are a growing worry in many countries. If inflation becomes persistent, it may force central banks to curb their ultra-loose monetary policies, such as through raising interest rates. India’s retail inflation for June rose 6.26% year-on-year while prices in May increased by 6.3% — the numbers were above the RBI’s inflation target range of 2% to 6%.

India’s chief economic advisor hits back at IMF downgrade, says it’s ‘significantly off the mark’, CNBC, Aug 2