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Discuss the International Monetary Fund’s forecast about India’s GDP growth and analyse its implications on RBI’s monetary policy.

Topic: Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

5. Discuss the International Monetary Fund’s forecast about India’s GDP growth and analyse its implications on RBI’s monetary policy. (250 words)

Reference:  Indian Express

Why the question:

Later this week, on August 6, the Monetary Policy Committee of the Reserve Bank of India will unveil its latest monetary policy review.  Thus the question.

Key Demand of the question:

The article brings to us the International Monetary Fund’s forecast about India’s GDP and growth.

Directive:

Discuss – This is an all-encompassing directive – you have to debate on paper by going through the details of the issues concerned by examining each one of them. You have to give reasons for both for and against arguments.

Structure of the answer:

Introduction:

The IMF cut India’s GDP growth forecast for 2021-22 (or FY22) by as much as three percentage points. In April, IMF expected India’s real GDP to grow by 12.5% this year; in July, it revised that forecast to just 9.5%.

Body:

IMF points to two broad sets of reasons why it dialed down India’s GDP growth forecast. The first is the inadequate levels of vaccination. See the chart below, which points out how emerging economies such as India have only 11% of their population fully vaccinated. And the second key factor is the kind of policy support that the Indian economy has received.

Then discuss the implications of above forecast for RBI’s monetary policy.

Conclusion:

Take hints from the article and conclude suitably.