India’s Macroeconomic Data Might Have Some Issues, But There Is No Bias, Says IMF

Despite all the debate around the quality of India’s macroeconomic data, the International Monetary Fund said the country’s accounts data is not biased in one direction.

The quality of India’s macroeconomic data is “not bad” when compared with other emerging market economies, said Ranil Salgado, mission chief for India at the fund.

“We have actually had some of our statistical experts look at the Indian national accounts data. Generally they find that for an emerging market, India is not bad. There are areas it needs to improve, but relative to other emerging markets it is not bad. And what we are fairly confident about is that there is no systematic bias in the numbers,” Salgado told BloombergQuint in an interview in Washington DC.

To improve the quality of its macroeconomic data, India needs to work on its price indices and measure its informal sector better, he said.

Talking about India’s growth, Salgado said the recent slowdown in India is largely cyclical led by environmental and regulatory uncertainty, slower rural income growth and issues in the financial sector.

“We do believe that a growth in the long term in India still remains quite strong and that’s why we are envisioning a pick up in the next fiscal year. That would be led by monetary policy rate cuts which the Reserve Bank of India has already taken and certain measures the government has already taken for certain sectors like real estate, vehicle sales and the recent corporate tax cut,” Salgado said.

The IMF views the high unemployment rate and the lower participation of women in the labour force as impediments to India’s growth, which need to be reversed at the earliest. India also needs greater formal sector job creation to aid this, Salgado said.

If India aims to reach the $5 trillion size for its economy by 2024-25, it needs to take up several structural reforms, most important of which is fixing the problems in the financial sector, the IMF said. According to Salgado, the government has already taken up steps to improve the public sector banking system by forcing recognition of bad loans, introducing the insolvency and bankruptcy code as well as providing nearly Rs 3 lakh crore worth of capital to these banks.

“The next step would be to improve governance of public sector banks. We still see recurring problems. Now the government is trying that. Improving the governance. We think more can be done there. Second is that we think the government could gradually be reducing its position in public sector banks, by either reducing its stake in them or perhaps even disinvesting somewhat,” he said.

To introduce more structural reforms in the public sector banking system, the government would have to focus on improving the risk management practices at these lenders and also improve the remuneration it provides to the top management, Salgado said.

As far as non-banking financial institutions are concerned, an asset quality review of these companies would help better judge the quality of the loan book that they have built, Salgado said, adding that it has helped the commercial banking space over the last few years in restoring confidence.

“We understand from the RBI that it is doing some internal work on this. We hope to see something in the future,” he said.

Watch the full interview here: