Infrastructure Funding To Propel Growth, Inflation A Concern: IMF's Gita Gopinath

As the International Monetary Fund (IMF) has kept India's growth projection unchanged at 9.5 per cent for 2021, its chief economist Gita Gopinath has said that in order to maintain the growth path, the country will have to keep up the vaccination rate and said that public infrastructure investment will propel economic recovery. At the same time though, she said that inflation and unemployment are key factors on which the government will have to keep an eye on.

“Manufacturing and services sectors have shown improvement after the crushing second wave of the Coronavirus pandemic subsided but the area of focus would be public infrastructure investment, as it is from there that growth is going to come from,” Ms Gopinath told NDTV.

The coal sector, higher oil prices and inflation are some of the key factors on which India will have to keep an eye on, she said. “Secondly India has to vaccinate to counter the pandemic. Keep the confidence high, inflation is important as core inflation is high in India and this needs to be looked into,” she observed.

At the same time on close observation it can be noted that while listed companies have recovered, it is the micro small and medium enterprises which have been hit hard by the pandemic and “looking at the fact that many people have not been able to return to work, employment is still a distance to be travelled,” Ms Gopinath noted further.

The IMF chief economist said that people are still using rural employment insurance money to survive and this is the real indicator of growth.

“These are uncertain times, the financial sector risk and the infection risk is always there, so attention will have to paid to such indicators,” she suggested.

She also advocated greater fiscal support in near terms for households and health sectors and cutting down on cost of borrowings while keeping fiscal deficit in check.

She said that high rate of vaccination has kept India's growth upbeat and the fact that a large section of the population has got at least one dose, has helped.

Ms Gopinath stressed on the fact that around 75 per cent of countries won't be able to meet the target of vaccinating 40 per cent of their populations by the end this year, especially those in Africa. In the light of this fact, India can play an active role in exporting vaccine to such nations.