Fiscal situation in India to improve over 5 years: IMF

NEW DELHI: The International Monetary Fund ( IMF) expects India’s fiscal situation to improve steadily over the next five years though the country’s overall government deficit will still be substantially higher than peers.

The ‘Fiscal Monitor’ released ahead of the Fund’s annual meeting shows India’s total fiscal deficit, which would include that of the states as well, gliding down to 6.1 per cent of GDP from expected 7.2 per cent of GDP in the current financial year.

Simultaneously released Global Financial Stability Report (GFSR) noted the downturn in India’s credit cycle and the rise in stressed loans.

According to India’s official numbers, the fiscal deficit for the current year is pegged at 3.9 per cent, add to that the combined deficit of around 3 per cent for states, the total deficit nears 7 per cent.

“IMF and Indian presentations differ, particularly regarding divestment and license auction proceeds, net versus gross recording of revenues in certain minor categories, and some public sector lending,” the report noted. The fiscal roadmap drawn up by the government sees the deficit falling to 3 per cent of GDP by FY18.

Even after this decline, according to IMF estimates, India’s fiscal deficit would be highest among its BRICS peers and well above the average of 2.7 per cent of GDP for the entire emerging market.

The ‘Fiscal Monitor’ is third in the series of reports released by the IMF ahead of its annual meetings. The latest meeting will be held in Lima, Peru, between November 9 and 11.

The World Economic Outlook released on Tuesday has forecast India will grow 7.3 per cent in the current fiscal, same as last year, and slightly below the 7.5 per cent forecast by the IMF earlier. The GFSR noted the large “credit gap,” or deviation of current credit growth from the long-term trend in the case of many countries.

Though the gap was not so much for India, still there has been a rise in stressed assets.