International Monitory Fund (IMF)’s Chief Economist Gita Gopinath has favoured the extension of the pandemic support measures. The Indian government has provided a lot of schemes for small and medium enterprises, most of which is in the form of liquidity support. "…And you want to revisit it and see how effectively that is working and see whether additional support may need to be provided," Gopinath said while responding to a question on her recommendations to Finance Minister Nirmala Sitharaman, ahead of her presentation of the annual Union Budget on 1 February 2021.
“Government of India supported and focused on investment in infrastructure and expanding health sectors programmes like Ayushman Bharat, and a very credible divestment path for commercially viable companies”, IMF Chief Economist said. “It would be a good time for banks and Non-Banking Financial Companies (NBFCs) to raise capital given the attractiveness of financing conditions at this point”, she said.
Observing that there is a need for more public infrastructure spending and the government has expressed an intention to do that. But there might also be a need for the capital support to be provided by the government for public sector enterprises. That has been long on the table which is to improve governance of public sector banks, Chief Economist said.
We have to also keep in mind that as these pandemic measures are lifted, there would very likely be an increase in non-performing loans. Even the Reserve Bank of India has projected that, Gopinath said.
The International Monitory Fund (IMF) projected an impressive 11.5% growth rate for India in 2021. While this is attributable to the stronger than expected recovery, Gopinath said.