IMF's Recommendations and Observations on India's Economic Policies

Structural Reforms

• The International Monetary Fund (IMF) emphasizes the need for structural reforms in India to support economic development.
• Key areas highlighted include building human capital, enhancing female labour force participation, sustaining public investment momentum, and improving the business environment.

Exchange-Rate Regime Reclassification

• India’s exchange-rate regime has been reclassified from 'stabilised' to ‘crawl-like arrangement’, allowing small, gradual currency value adjustments to address inflation differences.

Economic Growth and Trade

• The Indian Rupee hit a record low of 89.49 against the dollar recently.
• Deeper trade integration and emphasis on research and development are essential for enhancing competitiveness and attracting foreign investment.

Green Transition

• Advancing the green transition with expanded concessional financing access is crucial for sustainable growth.

Economic Performance and Forecast

• The IMF recognizes India's strong economic performance and resilience, largely due to sound macroeconomic policies and reforms.
• India’s GDP is projected to grow by 6.6% in FY26 and 6.2% in FY27, despite global challenges.

Impact of Tariffs and Inflation

• Assuming prolonged 50% US tariffs, inflation is projected to reduce to 2.8% before rising to 4% the following year.
• The GST reforms and lower effective rates are expected to mitigate the impact.

Fiscal Policies and Recommendations

• The IMF supports India’s fiscal consolidation plans but advises strict spending control and monitoring of GST and tax cuts' impact.
• Recommended measures include targeted and temporary tariff relief and fiscal consolidation aligned with tariff-driven growth effects.

Monetary Policy

• The IMF supports the Reserve Bank of India’s data-driven approach and suggests potential easing if tariffs remain high and inflation is stable.