IMF wants India to fight slowdown by easing money supply
The International Monetary Fund today urged India to further ease money supply to fight economic slowdown while cautioning that
additional expenditure and more tax reliefs could raise public debt to unsustainable levels.
Commending the steps taken by the Reserve Bank to ease money policy by reducing key policy rates and ratios, the IMF in its annual review of the Indian economy said, "(there is) scope for further monetary easing, in light of projected decline in inflationary pressures and the need to reinforce confidence and sustain bank credit."
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I respect IMF and its opinions. I also understand that IMF's advice will always be biased towards monetary and not fiscal policies. However, I don't think that at this stage India needs to be worried about debt levels. It is a time to invest and ensure that the economy is moving.
A high debt/GDP ratio is never good. However, instead of reducing the numerator (debt) you can also focus on increasing the denominator (GDP).
This is a very uncertain time for the economy. Every govt should adopt a mix of fiscal and monetary policies to tackle the situation.
So...don't listen to IMF- Spend and invest(at least not now)
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