After IMF slashes growth forecast, its chief says Indian economy on 'solid track'

New Delhi: Just days after the International Monetary Fund (IMF) slashed India's GDP growth rate to 6.7 percent in 2017, slower than the 7.2% it had forecast in April, due to the lingering impact of the government's sudden demonetisation last year and a newly introduced goods and services tax, the international body's chief Christine Lagarde has said that the Indian economy is on a firm footing.

IMF chief Christine Lagarde on Sunday said the Indian economy is on a "very solid track" in the mid-term.

"Turning to India...we have slightly downgraded India; but we believe that India is for the medium and long-term on a growth track that is much more solid as a result of the structural reforms that have been conducted in India in the last couple of years," the IMF Managing Director Christine Lagarde said.

Describing the two major recent reforms in India - the notes ban and Goods and Services Tax (GST) - as a monumental effort, Ms Lagarde said it is hardly surprising that there "is a little bit of a short-term slowdown" as a result.

"But for the medium term, we see a very solid track ahead for the Indian economy," she said to a question on India.

"We very much hope that the combination of fiscal, because the deficit has been reduced, inflation has been down significantly, and the structural reforms will actually deliver the jobs that the Indian population, particularly the young Indian people expect in the future," Ms Lagarde said.

The IMF had earlier said strong government spending and data revisions in India led it to revise upward 2016 growth to 7.1 percent. But India's gross domestic product growth decelerated to 5.7 percent in the April-June quarter. The IMF now sees India growing at a slower pace in 2017 than it had initially expected, a view shared by many other international institutions.

The World Bank too scaled down India's economic growth expectations to 7 percent for the financial year ending March 2018, from a projection of 7.2 percent earlier. The Asian Development Bank has cut India's growth forecast to 7 percent and the Organization for Economic Cooperation and Development estimates that India's economy will grow 6.7 percent in 2017.

The Reserve Bank of India also slashed its forecast for real economic growth to 6.7 percent this fiscal year ending March, from its prediction of 7.3 percent in August. RBI uses gross value added growth as a measure of economic growth instead of the usual gross domestic product.

With PTI Inputs