Washington: India’s strong economic growth is helping cushion fiscal pressures, but risks from subsidies and elevated debt remain, the International Monetary Fund (IMF) said.
“Strong growth makes life much easier. It can’t be much in a better position if they were growing as India is growing,” Rodrigo Valdes, Director of the IMF’s Fiscal Affairs Department, said during a press briefing on the Fund’s latest Fiscal Monitor on Wednesday (local time).
He stressed that India’s growth momentum is not cyclical but structural. “India’s not a cyclical phenomenon. Its trend growth is much higher,” he said.
The IMF said India’s fiscal targets remain achievable but flagged potential risks from continued support measures. “We think that the fiscal targets are within reach. However, there are some risks from the subsidies to fertilisers and fuel prices,” Valdes said.
India’s debt-to-GDP ratio remains elevated, and the IMF underscored the need for sustained fiscal consolidation over the medium term. “In the medium run, India should sustain the efforts to lower its debt-to-GDP ratio to open space for other emergency spending,” Valdes said.
The comments come amid global fiscal tightening pressures as countries respond to higher energy and food prices triggered by geopolitical tensions, including the ongoing conflict in the Middle East.
IMF officials said governments worldwide are facing difficult trade-offs, with limited fiscal space compared to the pandemic period. “Countries have much less fiscal space, room for manoeuvre. Debt levels are high in many parts of the world,” Deputy Director Era Dabla-Norris said.
India, as one of the fastest-growing major economies, is better positioned than many peers to manage these challenges, but the Fund cautioned that sustained policy discipline will be critical.
In recent years, India has maintained relatively strong growth compared to other large economies, supported by domestic demand, public investment and structural reforms. The government has also outlined a path for gradual fiscal consolidation following pandemic-era spending.
(IANS)
