The International Monetary Fund logo is seen outside the headquarters building in Washington. Image used for representation purpose only.
| Photo Credit: Reuters

Photo used for representation purpose only.
| Photo Credit: Getty Images/iStockphoto

India’s forex reserves dropped by $5.693 billion to $634.585 billion in the week ended January 3, the Reserve Bank of India said on Friday (January 10, 2025).

In the previous reporting week, the overall kitty had declined by $4.112 billion to $640.279 billion.

The reserves have been on a declining trend for the last few weeks, and the drop has been attributed to revaluation along with forex market interventions by RBI to help reduce volatility in the rupee. The forex reserves had increased to an all-time high of $704.885 billion in end-September.

For the week ended January 3, foreign currency assets, a major component of the reserves, decreased by $6.441 billion to $545.48 billion, the data released on Friday (January 10, 2025) showed.

Expressed in dollar terms, the foreign currency assets include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves.

Gold reserves increased by $824 million to $67.092 billion during the week, the RBI said.

The Special Drawing Rights (SDRs) were down by $58 million to $17.815 billion, the apex bank said.

India’s reserve position with the IMF was down by $18 million at $4.199 billion in the reporting week, the apex bank data showed.

An unprecedented financial crash in 2022 brought months of consumer goods shortages, with inflation peaking at nearly 70% that year. File
| Photo Credit: Reuters

Sri Lanka’s consumer prices fell by 2.1% in November, the highest deflation rate recorded by the economically fragile island nation since 1961, official data showed Saturday (November 30, 2024).

An unprecedented financial crash in 2022 brought months of consumer goods shortages, with inflation peaking at nearly 70% that year.

Since then, a $2.9 billion bailout loan from the International Monetary Fund (IMF), tax hikes, and other austerity measures have slowly made headway in repairing the island’s economy.

“Headline inflation will remain negative in the next few months, deeper than previously projected, mainly due to larger downward adjustments in energy prices and reductions in volatile food prices,” Sri Lanka’s central bank said in a statement.

The bank said inflation was likely to return to its target level of five percent in the coming months.

Sri Lanka had already seen deflation of 0.8% in October and 0.5% in September.

President Anura Kumara Dissanayake, who was elected in September, has vowed to maintain the IMF bailout programme negotiated by his predecessor that includes higher taxes and cuts to state spending.

Washington:

India’s priority is not to impose its dominance but to enhance its influence, Union Finance Minister Nirmala Sitharaman has said, asserting that no country, whether the US or China, can ignore New Delhi today.

Ms. Sitharaman made the remarks on Wednesday during a panel discussion on “Bretton Woods at 80: Priorities for the Next Decade” organised by the Center for Global Development here.

The minister arrived here on Tuesday to attend the annual meetings of the Bretton Woods Institutions — the International Monetary Fund and the World Bank.

“India’s priority is not to impose its dominance, in the sense we are the biggest democracy we have in the world, the largest population, but to enhance its influence,” she said.

Asserting that one in every six people in the world is an Indian, she said, “You just cannot ignore our economy and the way in which it is growing.”

Ms. Sitharaman underscored that the course developed countries took, from producing textiles, cycles, bikes, etc, and reaching development, is “no longer available”.

Questioning if India was in a position to define that path, she talked about the country’s leading role in technology and how Indians have the system to run complex corporate set-ups.

“You really can’t ignore it. Also, the geopolitical neighbourhood in which we live. No country, the US, which is very far away from us, or China, which is very close to us, can ignore us,” she said.

During the discussion, she said that India has always “stood in favour of multilateral institutions” and added that it has followed policies of “strategic and peaceful multilateralism”.

However, she highlighted that multilateral institutions are failing to produce viable solutions.

“We didn’t want any time undermining any multilateral institution. But progressively we see the hope and the expectations which were pinned on multilateral institutions are frittered away because we think no solutions are coming out of them,” she said.

“These institutions now are not offering an alternative pathway,” she added.

She said that multinational institutions, with a wealth of information and experience, manpower, and human resources, should strengthen institutions for the global good, which is “very necessary” to strengthen multilateralism.

“We are in favour of multilateralism,” Ms. Sitharaman added.

She stressed that the Bretton Woods institutions should work on this, rather than reacting to future developments.

“Unfortunately, in the last few decades, we see them reacting to future developments with the strength that they have. Therefore, information sharing is one thing,” she said.

“India, of course, has an international solar alliance and biofuel alliance, and we’re talking about disaster-resilient infrastructure. All these need money. All these need help for countries which are in smaller economies, island economies, which need them,” she said.

“So, through the digital public infrastructure that we have publicly funded and taken up to different countries, we are spreading that attention. These are areas in which India will contribute,” the Finance Minister said.

At a separate roundtable here, Ms. Sitharaman said that India has created the Coalition for Disaster Resilient Infrastructure (CDRI) to transform the infrastructure systems for resilience against natural disasters and adapt to climate change.

Chairing the Roundtable on Disaster Resilient Infrastructure, she stressed the danger of the development gains being undercut by increasing climate-induced risks to infrastructure and the critical services it supports.

Ms. Sitharaman said that over the years, India has ensured resilient economic growth by not only investing in hard infrastructure but also in building institutional capacity through creating national and state-level Disaster Management Agencies.

Reassuring India’s commitment to sharing best practices during this resilience-building journey, the Union Finance Minister extended assistance to Global South towards shared challenges. She said that India looks forward to partnering with Africa and other developing countries to strengthen their resilience of infrastructure.

She added that under the G20 India Presidency, a Disaster Risk Reduction Working Group was created to increase commitment to disaster and climate-resilient infrastructure and to prioritise stronger national financial frameworks for disaster risk reduction.

The minister also participated in the Global Sovereign Debt Roundtable (GSDR).

In her intervention, she stressed improving timeliness, transparency and predictability, ensuring comparability of treatment among creditors and prioritising coordinated efforts to ensure low-cost, long-term financing and providing targeted technical assistance to strengthen fiscal capacity to build resilience in vulnerable countries.

Ms. Sitharaman called for a deeper dialogue to help countries meet debt obligations without compromising critical investments. She also cautioned against contingency financing instruments as they can result in deferred obligations, which can worsen future debt challenges.

She encouraged leveraging the GSDR’s informal platform to better understand the perspectives of all parties, address concerns and provide informed guidance to countries on the risks and benefits of these instruments.

(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)

A view of the International Monetary Fund headquarters building in Washington, DC ahead of the 2024 IMF/World Bank Annual Meetings.
| Photo Credit: AFP

The International Monetary Fund (IMF) maintained its June growth rate projects for India in its latest World Economic Outlook (WEO) released on Tuesday (October 22, 2024), to kick off the World Bank and IMF Annual Meetings in Washington.

The multilateral lender expected India to grow at 7% in the current fiscal year ending March 31, 2025 and 6.5% in the next fiscal year (FY2025-26). World output was expected to grow at 3.2% in 2024 as well as 2025.

The drop in India’s growth from 8.2% in 2023 is “because pent-up demand accumulated during the pandemic has been exhausted, as the economy reconnects with its potential,” the report said.

The U.S. is projected to grow at 2.8% this year and 2.2% next year, an upward revision from the July WEO update.

Globally, inflation has been on the way down.

“The global battle against inflation has largely been won, even though price pressures persist in some countries,” the IMF said. Inflation, which had touched 9.4% in the third quarter of 2022, is expected to be 3.5% by the end of 2025.

A global recession has been avoided through the disinflationary process, despite a synchronised tightening of monetary conditions, the IMF said. However, downside risks now dominate the outlook. The risks had grown since the previous WEO releases in April and June this year.

The international financial institutions are meeting on the eve of the U.S. election and several conflicts around the world – and this has made its impact felt on projections. Finance Ministry officials from around the world, including Finance Minister Nirmala Sitharaman, are due for meetings in Washington during the course of the week.

“Of course, there is geopolitical risk with the potential for escalation of regional conflicts, and how this might affect commodity markets…,” IMF Chief Economist Pierre-Olivier Gourinchas told reporters on a briefing call prior to the report release.

The Russia-Ukraine war continues and the conflict in West Asia has intensified, including in Lebanon, in recent weeks.

The IMF Chief Economist also identified growing protectionist policies as one of the risks. Also, monetary policy remaining too tight in some countries for too long and this impacting labour markets was a risk, according to Mr. Gourinchas. Sovereign debt stress and activity in China being weak were some of the other risks that he listed.

The IMF recommended a ‘triple policy pivot’ to respond to the “relatively mediocre” growth rate, as Mr. Gourinchas termed it, of 3.2% over the medium term. The first is moving to a neutral monetary policy stance, a process under way in many countries. The second is the need to build fiscal buffers after years of a loose fiscal policy. The third is structural reforms to increase growth and productivity, coping with ageing populations and younger people looking for opportunities in some parts of the world, tackling the climate transition and increasing resilience.

Union Finance Minister Nirmala Sitharaman with Deputy Managing Director of the International Monetary Fund Gita Gopinath, during a meeting, in New Delhi, on August 17, 2024.
| Photo Credit: PTI

India has been a laggard among G20 nations in terms of employment generation and the country needs to create an additional 148 million jobs by 2030 given the population growth, IMF’s First Deputy Managing Director Gita Gopinath said on Saturday (August 17, 2024).

India on an average grew at 6.6% for the decade starting 2010 but the employment rate was under 2%, she said at the Delhi School of Economics Diamond Jubilee event here.

So, India’s employment rate is much less when compared to other G20 nations, she said.

“If you look at India’s projections in terms of population growth, India will have to create anywhere between 60 million to 148 million additional jobs cumulatively between now and 2030… we are already in 2024, so in a short period of time we have to create a lot of jobs,” she said.

Given the scale of what is needed, it is going to require basic reforms including land reforms and implementation of labour codes.

To generate more jobs, she said, there is a need for an increase in private investment as it is not commensurate with 7% growth in GDP.

However, she said, public investment is going well but private investment has to improve.

She also said that India should revamp its education system so that it can improve the skill set of its workforce.

Besides, she said, there is a need to further ease of doing business, improve the regulatory environment and broaden the tax base.

‘India will need more reforms to stay on growth path’

India will need to undertake more reforms to be able to continue on the path of raising economic growth and to make sure that enough job creation happens in the country, Ms. Gopinath said.

Ms. Gopinath further said that India will be required to reduce import tariffs if it wants to be an important player in the global supply chains.

“The significant improvements have been made by the government over the years in terms structural reforms.” While noting that the world is in an environment where trade integration has been questioned, Gopinath said it is important for India to remain open for global trade.

“Tariff rates in India are higher than in its other peer economies. If it wants to be an important player on the world stage and an important part of global supply chains, it is going to require reducing those tariffs,” the eminent economist said.

Gopinath said it is a tremendous aspiration to get to a developed country status but it does not happen automatically, and requires ongoing, consistent efforts, pretty broad scale, across many areas to deliver on that.

“India has grown well in terms of its overall growth rate, and at 7%, it is the fastest growing major economy in the world.

“The question is, how does one keep up the momentum and raise it further so that you can increase per capita incomes in India to get to being an advanced economy,” she said.

Responding to a question on taxation, she said India has parallels with other developing countries, where most of the tax revenue that is collected is indirect taxes and not direct taxes, not in form of income taxes.

“We have been advising other developing countries too, that it is helpful to broaden the personal income tax base and so that you can have more income coming from there,” she said.

Referring to the cut in corporate tax rate by the Modi government, Ms. Gopinath said although it was helpful it is less the tax rate that matters, but what matters is just making sure that there are no loopholes and there are not too many leakages that happen in terms of tax exemptions.

“It is very important to have sufficient progressivity in your tax system…making sure that you are (India) getting enough from your capital gains tax from your capital income tax is going to be critical,” she said.

Gopinath also suggested that now there is better technology to implement property tax and this is again another area where work is needed.