Indian economy faced abrupt slowdown in 2019; it's not in recession: IMF MD

Kristalina Georgieva said India had undertaken some important reforms that over the longer term would be beneficial for the country, but they do have some short-term impact.

The Indian economy experienced some abrupt slowdown in 2019 due to turbulence in non-banking financial institutions and major reform measures such as GST and demonetisation, but it is not in a recession, IMF Managing Director Kristalina Georgieva has said.

"The Indian economy indeed has experienced an abrupt slowdown in 2019. We had to revise our growth projections, downwards to four percent for last year. We are expecting 5.8 per cent (growth rate) in 2020 and then an upward trajectory to 6.5 percent in 2021," Georgieva told a group of foreign journalists here on Friday.

"It appears that the main reason for this slowdown was the non-banking financial institutions experiencing a turbulence," she said on the eve of Union Finance Minister Nirmala Sitharaman presenting the annual budget in Parliament on Saturday.

She said India had undertaken some important reforms that over the longer term would be beneficial for the country, but they do have some short-term impact.

ALSO READ: Budget 2020 LIVE updates

"For example, coming with the unified tax system, and the demonetisation that took place. These are steps that over time are beneficial, but of course they might, might be somewhat disruptive over short term," Georgieva said in response to a question.

The International Monetary Fund (IMF) Managing Director said that there is not a lot of fiscal space in India. But we also recognise that the policies of the government on that side, on the fiscal side have been prudent. We will see how the reading of the budget, the submission of the budget goes, tomorrow, she said.

In the medium-term, she said, the IMF remains optimistic about India. This is why we see that upswing potential for the growth in the country, she said.

Georgieva said that the current economic slowdown cannot be described as a recession. "No.... You're far from that. But it is a significant slowdown, not the recession," she said.

The IMF managing Director noted that the consumption in India also slowed down and that contributed to the overall slowdown in the economy. The IMF would be keen to see what India does to get relatively sound macroeconomic fundamentals to pay off in terms of better growth trajectory, she said ahead of the budget.

Budget 2020: IT sector for wider use of artificial intelligence in economy

AI is expected to have a huge impact not only in commerce, but also in health, national security, cybersecurity, food security, education and global warming.

Budget 2020 : With disruptive technologies like Artificial Intelligence (AI) driving businesses, the IT sector wants the Union Budget for fiscal 2020-21 to ensure greater use of these to spur a sluggish economy among other measures for the sector, industry experts said on Friday.

"The budget should announce a fund like Singapore's Temasek that will invest only in early-stage Indian AI start-ups and lower long-term capital gain's tax for investing in AI-based firms," digital intelligence firm Germin8 founder chief executive Ranjit Nair told IANS.

With the US and China racing ahead of India in AI research, AI entrepreneurship and government investment in AI, he said the budget should make it easier for start-ups to access capital, as they face an uphill task in early-stage funding.

"The government bring policies that encourage AI companies. Ease of doing business means less bureaucracy so that entrepreneurs can build solutions without distractions," he said.

AI is expected to have a huge impact not only in commerce, but also in health, national security, cybersecurity, food security, education and global warming.

"The government should announce AI challenges, which make academia and industry solve an important problem in the country. The state's role should give a crisp problem definition, provide access to data and provide a good cash prize," Nair said.

Though thousands of engineering graduates pass out every year across the country, India is behind other nations in AI PhDs and AI research. Hence, the budget should allot more grants for AI research and offer incentives to institutes investing in AI training, he added.

Noting that IT was one of the few sectors that remained growth-driven despite the eonomic slowdown since the last fiscal, Cigniti Technologies chairman C.V. 

Subramanyam said the budget should give relief or reduce dividend distribution tax (DDT) for IT firms operating in the country.

Rajiv Kumar to Krishnamurthy Subramanian: The team behind FM's Budget 2020

A 1984 batch officer from the Jharkhand cadre, Kumar is known as the driving force behind the spate of mergers of state-owned banks.

Budget 2020 : Finance Minister Nirmala Sitharaman will present her second Budget a little more than a month from now. With growth at its lowest in more than six years and a long-lasting slowdown affecting demand and consumption across sectors, Sitharaman and her team are looking to announce measures to boost growth and activity.

Also, after a number of rollbacks following the last Budget, the political leadership is looking to seize back initiative as the government is being criticised by stakeholders for not being able to manage the slowdown, with multiple agencies, including the RBI, slashing growth forecasts for the year.

Like any other FM, Sitharaman will depend on her team of bureaucrats and advisors to frame and present the budget. Arup Roychoudhury compiles brief profiles:

Rajiv Kumar

(Finance and financial services secretary)

According to the norm, being the senior-most of the five secretaries in the Finance Ministry, Financial

Services Secretary Rajiv Kumar also holds the designation of finance secretary. A 1984 batch officer from the Jharkhand cadre, Kumar is known as the driving force behind the spate of mergers of state-owned banks. The ambitious Rs 2.1-trillion bank recapitalisation programme was also announced during his time. The biggest challenge that Kumar has had to deal with during his stint is the level of toxic assets in the banking system and the liquidity crisis in non-banking financial companies (NBFCs). The upcoming Union Budget 2020-21 will be his last, as he is expected to retire from the service at the end of February. Even if the financial services secretary gets an extension, it is likely to be for a few more months, till the Finance Bill is passed.

Ajay Bhushan Pandey

(Revenue secretary)

Replacing Hasmukh Adhia was never meant to be easy. And it hasn’t been for Pandey, who is also the chairman of the Goods and Service Tax Network and, till recently, was heading the Unique Identification Authority of India as well. Pandey has come in for heavy criticism for giving unrealistic tax revenue targets for the year. With growth faltering, all the direct and indirect tax projections are now coming undone, and the Centre is unlikely to meet the fiscal deficit target of 3.3 per cent of gross domestic product for 2019-20. It remains to be seen what sort of a positive impact the recent corporate tax cuts have on investment levels by the private sector.