More Stories

Informist, Monday, Jul. 20, 2026

 

Please click here to read all liners published on this story

--IMF Papageorgiou: See India FY27 growth at 6.4?spite West Asia tensions
--CONTEXT: IMF India Mission Chief Papageorgiou in interview with Informist
--IMF Papageorgiou: W Asia flare-up can pose inflationary risks, hit growth
--IMF Papageorgiou:Below expectation monsoon key risk to India's growth, CPI
--IMF Papageorgiou: India on track to meet 4.3% fiscal deficit aim for FY27
--IMF Papageorgiou: India must take targeted fisc steps if weather risks hit
--Papageorgiou: Prefer targeted over broad-based steps for better fisc mgmt
--IMF Papageorgiou:Targeted fisc steps to help India stick to fisc glide path
--IMF Papageorgiou:Targeted support steps to make fisc room for future shocks
--IMF Papageorgiou: India debt-to-GDP aim of 50% by FY31 remains achievable
--IMF Papageorgiou:RBI FX buffer enough to manage crude at $100/bbl for long

 

By Pratiksha, Priyasmita Dutta, and Shweta
 

NEW DELHI – India must rely on temporary and well-targeted transfers rather than broad-based support measures to shield the economy, should the need arise, from adverse weather-related risks amidst the existing global uncertainties, according to International Monetary Fund Mission Chief for India Chris Papageorgiou. This will help the government protect the vulnerable sections of society while preserving New Delhi's medium-term fiscal consolidation objectives, Papageorgiou told Informist in an interview.

 

"The priority is to meet the needs of the most vulnerable, and in every shock, this is a standard policy of the IMF, which is to support the most vulnerable," Papageorgiou said. "So, we are in favour of a targeted approach, and not a broad approach, because a blanket approach would be much more expensive, and then would risk breaching the (fiscal) targets of the authorities."

 

Papageorgiou's comments come as India battles one of its worst energy crises while also tackling Super El Nino conditions. India's expenses have already shot up following the war in West Asia because of the sharp rise global commodity prices, including key agricultural products like fertilisers. A Super El Nino condition will only prompt the government to protect its large agriculture-dependent population with various fiscal measures, such as high food and fertiliser subsidies.

 

The government's finances have been under pressure so far this year, with some economists expecting the Centre to miss its fiscal deficit target for FY27. In Apr-May, the government's fiscal deficit was over 12 times the year-ago figure. The sharp rise in the fiscal gap was due to 18% growth in total expenditure and a 2% drop in revenue. The Union Budget pegged the fiscal deficit for FY27 at 4.3% of GDP, or INR 16.96 trillion. The fiscal deficit target for FY27 will, however, be 4.5% of GDP, based on the downward revision in India's nominal GDP in the new series with FY23 as the base year.

 

According to Papageorgiou, targeted support will not just help India meet its fiscal consolidation targets but also create room for more fiscal allocations that may be required for subsequent shocks. "If you do it targeted--India has the means by which it can identify the poor and the vulnerable--then you have more resources, you have more fiscal space for the next shock," Papageorgiou said. Despite the uncertainties and risks of fiscal slippage, he said that so far India's fiscal deficit target and debt-to-GDP reduction target seem achievable.

 

The IMF had suggested last year that India must opt for a neutral fiscal stance rather than consolidation, with an output gap expected to open in FY27, assuming that the 50% tariffs imposed by the US remain in place. "That said, if a tariff reduction avoids an output gap, fiscal consolidation should continue (in FY27)," the IMF had said in its country report titled 'India: 2025 Article IV Consultation' released in November.

 

While the risks from the US tariffs have gone down, risks from energy price shocks have emerged this year. Papageorgiou said India is estimated to have a small negative output gap in FY27 as a result of the energy shock. "In this context, maintaining a broadly neutral fiscal stance while preserving the gains from past (fiscal consolidation) and continuing to build fiscal space over the medium term remains appropriate," he said. 

 

Below are edited excerpts of the interview:

 

Q. The IMF projected India's GDP growth for FY27 at 6.4% with the assumption that the Strait of Hormuz will reopen mid-July. However, amid renewed hostilities in the West Asian region and crude oil prices inching up again, do you see any further downside to this projection?

A. At this stage, we remain comfortable with our FY27 growth projection of 6.4%. That said, the outlook remains subject to considerable uncertainty and developments in West Asia continue to pose risks on both sides.

 

If the conflict were to escalate further, leading to persistently high energy prices or prolonged supply disruptions, that would add to inflationary pressures and weigh on growth. Conversely, continued progress towards reopening the Strait of Hormuz and a faster normalisation of energy markets would lower input costs and support economic activity.

 

Now, beyond developments in West Asia, other important risks include--on the downside--a weaker-than-expected monsoon, which could raise food inflation and downturn rural activity, but on the upside, stronger-than-expected investment in AI (artificial intelligence) and other technologies globally, which could boost external demand and support growth.

 

More broadly, India entered this period of heightened uncertainty from a position of strength, with robust growth, low inflation, ample foreign exchange reserves, and healthy corporate and bank balance sheets. These macroeconomic buffers, together with prudent macro policies, should help the economy remain resilient, even in a challenging external environment.

 

Q. The IMF projected CPI inflation at 4.7% in FY27. Do you now expect inflation to be higher given the projected lower-than-normal monsoon and the possibility of El Nino this year?

A. Our July forecast (of 4.7%) already incorporated significantly higher assumptions for global energy and also food prices. That said, weather remains an important source of uncertainty. This is very well recognised. A weaker-than-expected monsoon could put additional upward pressure on food prices and temporarily raise inflation, especially food inflation. Conversely, a positive Indian Ocean Dipole, together with faster-than-expected normalisation of global energy markets, could help offset some of these pressures.

 

We are closely monitoring rainfall developments and food price dynamics with a view to updating our assessment in the October World Economic Outlook.

 

Q.  Do you think the Indian government will be able to stick to its fiscal deficit and debt-GDP targets for FY27, given the pressure on its revenues due to the conflict in West Asia? Do you think the government will have to shell out any fiscal packages to deal with El Nino-related hits?

A. Our current assessment is that the authorities remain well-placed to meet their FY27 fiscal deficit target of 4.3% of GDP. Now, this assessment is subject to the unusually high uncertainty surrounding global energy and food prices.

 

On the domestic side, the main uncertainty relates to the first quarter fiscal outturns and the extent to which revenues and expenditures have deviated from the budget projections. Based on what we know today, the authorities appear to have sufficient room to offset these pressures while remaining on track to achieve their fiscal target.

 

Regarding the monsoon, it is still too early to assess whether additional fiscal support will be needed. In case the weather significantly impacts vulnerable households, our recommendation would be to rely on temporary and well-targeted transfers rather than broad-based support measures. The thinking behind this is that this approach protects those most affected, the vulnerable, the poor, while also preserving the government's medium-term fiscal consolidation objectives.

 

Q. You mentioned targeted cash transfers, or any kind of income transfer support. Can you elaborate on the sort of measures you are talking about?

A. We care about two things. Most important is to protect the poor and vulnerable in these situations, because they are the most affected. And, at the same time, protect the objective of the authorities, which is fiscal consolidation--remain on the fiscal deficit of 4.3%, with the chance of, as we say, to reduce debt by FY31 to 50%.

 

The priority is to meet the needs of the most vulnerable, and in every shock, this is a standard policy of the IMF, to support the most vulnerable. So, we are in favour of a targeted approach, and not a broad approach; a blanket approach would be much more expensive, and then would risk breaching the targets of the authorities.

 

If you do it targeted--India has the means by which it can identify the poor and the vulnerable--then you have more resources, you have more fiscal space for the next shock. So, it's not only about meeting the fiscal consolidation targets, which also have a medium-run perspective, but also creates, allows for more fiscal space for the upcoming shocks.

 

Q. Crude oil prices tend to have an impact on how the government manages its fiscal position. Right now, crude is trading around $86/barrel. At what level of crude oil price do you think the government will have to come in with a package?

A. It all depends on the uncertainty revolving around the West Asia conflict. We have prices already fluctuating quite a lot. It all depends on the outcome of the war.

 

Q. Is the government's target of lowering debt to 50% of GDP by FY31 achievable? Do you still think that, given high external uncertainty, India must adopt a neutral fiscal stance rather than consolidation?

A. Yes. We believe the debt objective remains achievable. If the government meets its FY27 fiscal deficit target of 4.3% of GDP and continues with its planned medium-term consolidation path, reducing public debt to around 50% of GDP by FY31, I think it remains within reach. India has made steady progress on consolidation in recent years, which has created fiscal space to respond to economic shocks, including the latest energy shock.

 

Under the July World Economic Outlook baseline, India is estimated to have a small negative output gap this fiscal year as a result of the energy shock. In this context, maintaining a broadly neutral fiscal stance while preserving the gains from past consolidation and continuing to build fiscal space over the medium term remain appropriate.

 

Q. The rupee saw sharp moves and came under significant pressure following the onset of the West Asia war. Would you still consider India's FX rate regime a "crawl-like" arrangement? Is there a chance this classification may change?

A. The rupee came under depreciation pressure following the onset of the West Asia conflict. This is driven by higher commodity prices, heightened global uncertainty, and equity outflows amid global risk aversion. We are still assessing RBI's latest measures and their macroeconomic implications, including for the rupee and the external sector.

 

Several of India's recent measures to liberalise the capital accounts could help boost inflows and mitigate external pressures from the energy shock in the near term while supporting further development of India's financial markets over the medium term. Now, that said, the medium-term outlook for the rupee is not only determined by these near-term measures and developments. It also has to do with India's fundamentals, policy mix, development level, and the global environment, which has shown (itself) to be significantly volatile.

 

Q. Do you think India has enough FX reserves to deal with a prolonged conflict in West Asia or any other global shock, with crude oil prices around $100/bbl, considering the RBI's large short forward book?

A. Yes, India entered this period of heightened uncertainty with ample foreign exchange buffers. India is, of course, exposed to energy shocks given its reliance on imported oil and gas. If oil prices were to remain around $100 per barrel for a prolonged period, external balances would come under pressure. Even so, starting from a position of strong reserve coverage, we believe the RBI has sufficient buffers to manage such a shock. I think we are looking at a reserve coverage of about seven months, which is very healthy.

 

This is one of the reasons we believe initial conditions for India have been strong as we entered this shock, but also previous shocks, which, of course, the authorities managed very well because of this reserve coverage.

 

Q. In the last Article IV report, the IMF assigned a "C" grade to India's national account statistics. Since then, the government has revised the base years of all key macroeconomic data. What is your assessment of the quality of India's national accounts and price statistics after the revamp? Do they solve all issues with India's macroeconomic data?

A. We very much welcome the statistics ministry's efforts to modernise India's statistical system. The recent revisions to the national accounts and the CPI address several of the concerns that had been raised previously.

 

Updating the base year and incorporating methodological improvements allows the statistics to better reflect the current structure of the economy and brings them further in line with international best practices. At the same time, statistical systems are continuously evolving in all countries, particularly in large and rapidly changing economies such as India.

 

Some important work remains in progress, including the publication of longer historical time series, additional methodological documentation, and the development of seasonally adjusted quarterly GDP estimates, which is also very important.

 

According to the information received from the authorities, MoSPI (Ministry of Statistics and Programme Implementation) is actively working in these areas, which is very welcome. Looking ahead, continued investment in data quality, source data, and statistical methodologies will help further strengthen India's macroeconomic statistics over time, with the recognition that India is a massive country with a lot of heterogeneity of experiences across different states.  End

 

US$1 = INR 96.44

 

Edited by Rajeev Pai

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.