This 2014 Article IV Consultation highlights that India’s growth has slowed markedly, reflecting global developments and domestic supply constraints, while inflation remains stubbornly high. Led by falling infrastructure and corporate investment, the slowdown has generalized to other sectors of the economy. The financial positions of banks and corporate have deteriorated. The principal risk facing India is the inward spillover from global financial market volatility. Growth is projected at 4.6 percent for fiscal year 2013/14, and should pick up to 5.4 percent in 2014/15 (at factor cost).


This 2014 Article IV Consultation highlights that India’s growth has slowed markedly, reflecting global developments and domestic supply constraints, while inflation remains stubbornly high. Led by falling infrastructure and corporate investment, the slowdown has generalized to other sectors of the economy. The financial positions of banks and corporate have deteriorated. The principal risk facing India is the inward spillover from global financial market volatility. Growth is projected at 4.6 percent for fiscal year 2013/14, and should pick up to 5.4 percent in 2014/15 (at factor cost).

Fund Relations

(As of November 30, 2013)

Membership Status:

Joined December 27, 1945; Article VIII.

General Resources Account

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SDR Department:

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Outstanding Purchases and Loans: None

Financial Arrangements:

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Projected Payments to Fund

(SDR million; based on existing use of resources and present holdings of SDRs):

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Exchange Rate Arrangement:

As per the Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER), the exchange rate in India is classified as floating. The exchange rate of the rupee is determined in the interbank market, where the Reserve Bank of India (RBI) intervenes at times. The RBI’s role is to modulate excessive volatility so as to maintain orderly conditions. On August 20, 1994, India accepted the obligations of Article VIII, Sections 2, 3, and 4 of the IMF Articles of Agreement. India maintains the following restrictions on the making of payments and transfers for current international transactions, which are subject to Fund approval under Article VIII, Section 2(a): restrictions related to the nontransferability of balances under the India-Russia debt agreement; restrictions arising from unsettled balances under inoperative bilateral payments arrangements with two Eastern European countries; and a restriction on the transfer of amortization payments on loans by non-resident relatives. The Executive Board has not approved these restrictions.

Article IV Consultation:

The previous Article IV consultation discussions were held in November 2012. The staff report (IMF Country Report No. 13/37) was discussed by the Executive Board on January 25, 2013.

FSAP Participation and ROSCs:

FSSA/FSAP report was issued in January 2001; a fiscal transparency ROSC was issued in February 2001 (; the data model of the ROSC (Country Report No. 04/96) was issued in April 2004. The missions for the FSAP Update took place in 2011, and concluding meetings were held in Delhi and Mumbai in January 2012—the FSSA Update report was published in January 2013 (Country Report No. 13/8). Detailed assessment reports on FSAP-related papers were issued in August 2013 and published as Country Reports No. 13/265–268.

Technical Assistance:

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Outreach and Other Activities:

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Resident Representative:

A resident representative’s office was opened in November 1991. Mr. Thomas Richardson has been the Senior Resident Representative since August 2012.

Relations with the World Bank Group

In Bank FY13 (July 1, 2012–June 30, 2013), IBRD/IDA lending in India totaled US$1.3 billion. IFC committed US$1.4 billion in FY13. The new World Bank Group’s (WBG) Country Partnership Strategy (CPS) for India for 2013-2017 focuses on helping India to accelerate poverty reduction and boost shared prosperity. The CPS is guided by the Government of India’s “Innovation Impulse with Investment” approach, which lays out the Government’s vision of how best to use the financing and expertise from multilateral institutions to address India’s development challenges and places significant importance on the value-added of the World Bank’s program that goes well beyond financing. It wants to partner with the WBG on projects that have a systemic and transformational impact, those that help innovate and pilot new approaches, and those that help leverage resources. The strategy is closely aligned the Government’s 12th Five-Year Plan, and its goal of “faster, sustainable, and more inclusive growth.”

Under the new CPS, the WBG will contribute to India’s development by deepening and strengthening WBG engagement in three priority areas: integration, rural-urban transformation and inclusion. A common theme across these areas will be an emphasis on improved governance, environmental sustainability, and gender equality. “Integration” will include addressing infrastructure gaps as one of the key measures needed to help low-income states converge more quickly with their faster-growing neighbors. With 600 million people expected to live in India’s cities by 2031, “transformation” will require intensified engagement over the strategy period and beyond on improving the management and livability of medium-sized cities. The rural-urban transformation presents tremendous opportunities, both for agriculture and poverty reduction, and competitiveness. Supporting urbanization is a key structural shift in the CPS. “Inclusion” will entail a stronger focus on human development with improvements in healthcare systems and nutrition, on the quality of education at all levels, as well as on better access to finance and social protection for the underprivileged.

A second significant shift in WBG support is towards 14 low-income and special category states1, where many of India’s poor and disadvantaged live. Over the next five years, the Bank will work with the Government to rebalance the lending portfolio, so that 30 percent of all IBRD/IDA lending will be directed to these states, which together account for 400 million (one-third of India’s poor people living on less than $1.25 per day). Many of these states also have human development indicators—high infant mortality, high child malnutrition, low female literacy—on par with the poorest countries in the world. IFC has also intensified its program in low-income states; annual commitments have more than quadrupled in the last five years from $60 million in FY09 to $273 million in FY13.

Engagement in more advanced states and at the central level will focus on activities that are transformative and innovative. Projects are expected to test second-generation approaches, which overtime could be scaled up and replicated in low-income states.

To make a meaningful contribution to India’s many development challenges and to meet the Millennium Development Goals, the volume of WBG support—from IBRD, IDA, and IFC—should reach $5 billion annually over the next five years. A robust knowledge portfolio will complement and underpin financing and includes (i) focus on in-depth analytical work on key cross-sectoral questions; (ii) inform design and implementation of future interventions by drawing on impact evaluations; (iii) respond quickly and flexibly with demand-driven technical assistance and just-in-time knowledge support to help reform and implementation; (iv) broker South-South and across-state knowledge exchanges; (v) develop flexible programmatic approaches to develop analytic and advisory activities; and (vi) scale-up training capacity. Aligned with its regional strategy, IFC’s Advisory Services program in India is aligned with the regional strategy on inclusion facilitating access to services for base of pyramid populations, and expanding the private sector’s footprint in low-income states), climate change, and global integration.

India: World Bank Financial Operations

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Source: World Bank

On an Indian fiscal year basis beginning April 1

April 1, 2012 through March 31, 2013.

Based on loan approval date.

Relations with the Asian Development Bank

The Asian Development Bank (AsDB) operations in India began in 1986. Cumulative public sector loan commitments totaled $28.4 billion as of 31 October 2013 for 175 loans. With an additional $2.2 billion in private sector loans (the latter without government guarantee), total loan commitments on a cumulative basis amount to $30.6 billion. These funds have been provided from AsDB’s ordinary capital resources (OCR). Also, AsDB has approved equity investments amounting to $0.3 billion. AsDB’s lending and equity activities are summarized below.

India: Asian Development Bank Financial Operations (sovereign and non-sovereign)

(In millions of U.S. dollars, as of 31 October 2013)

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Source: Asian Development Bank.

As of 31 October 2013.

AsDB’s India Country Partnership Strategy (2013-2017) (CPS) is based on three strategic pillars: (i) inclusive growth; (ii) environmental sustainability; and (iii) regional cooperation and integration. The CPS is anchored to AsDB’s Strategy 2020 and has been designed to support the Government of India’s 12th Five Year Plan (2012–2017) vision of faster, more inclusive, and sustainable growth. The CPS emphasizes robust infrastructure development, job creation and access to jobs, regional connectivity, and environmental sustainability. The backbone of the India program will be energy, transport, and urban services. On a selective basis, ADB will also invest in special purpose vehicles for infrastructure financing, water resources management, skills development, and state-level fiscal reforms.

Statistical Issues

1. Macroeconomic statistics are adequate for surveillance, but weaknesses remain in the timeliness and coverage of certain statistical series. India has an intricate system for compiling economic and financial statistics and produces a vast quantity of data covering most sectors of the economy, but these do not always follow international standards. India subscribed to the Special Data Dissemination Standards (SDDS) on December 27, 1996 and started posting its metadata on the Dissemination Standards Bulletin Board on October 30, 1997. It is currently in observance of the SDDS, although it uses flexibility options for timeliness of data on general government operations and on the periodicity and timeliness of labor market data.

2. The data module of the Report on Observance of Standards and Codes (ROSC, IMF Country Report No. 04/96) was published in April 2004. It assesses India’s data dissemination practices against the SDDS requirements and assesses the quality of six datasets based on the Data Quality Assessment Framework (DQAF) developed by STA.

3. National accounts and employment statistics: The Central Statistical Organization (CSO) releases a new series of national accounts, with base year 2004–2005 with a dissemination lag for quarterly releases of two months. Large revisions to historical series and major discrepancies between supply and expenditure national accounts complicate analysis: these differences have become larger in recent quarters. Supply-side data remain of better quality than expenditure-side data. Estimates of value added in constant prices for public administration and defense may be biased upwards, as they are based on the government’s wage bill (with arrears counted in the year that they are paid) deflated by the Wholesale Price Index (WPI). There are long standing deficiencies in employment data: they are only available on an annual basis and with a substantial lag, and they only cover the formal sector, which accounts for a small segment of the labor market.

4. Price statistics: Since January 2006, the Labour Bureau has published a CPI for industrial workers with a 2001 base year. A revised all-India CPI with new weights was unveiled in early 2011. Presently, there are four CPIs, each based on the consumption basket of a narrow category of consumers (namely industrial workers, urban and non-manual employees, agricultural laborers, and rural laborers). The CPIs are published with a lag of about one month. With the exception of the industrial workers CPI, the other indices are based on weights that are over ten years. The WPI was also recently revised and has a 2004/05 base year. Data are also subject to frequent and large revision, usually upward. New RBI price series on residential real estate have helped surveillance in this area, though geographic coverage remains limited, and price data for commercial real estate are not available. The RBI has started producing a series covering rural wage data, which helps surveillance, but economy-wide wage data are scant.

5. External sector statistics: While the concepts and definitions used to compile balance of payments statistics are broadly in line with the sixth edition of the Balance of Payments Manual (BPM6), trade data have quality, valuation, timing, and coverage problems, and data on trade prices, volumes, and composition are not regularly available on a timely basis. Only trade credit extended for more than 180 days is included in the balance of payments (and the IIP); trade credit is often less than 180 days in most countries. Bilateral data on services exports to the United States and other developed countries are manifold higher than counterpart services imports published by these same countries. External debt statistics are available on a quarterly basis with a one quarter lag. Estimates of short-term external debt are presented in the debt statistics on an original maturity basis. The short-term maturity attribution on a residual maturity basis is only available annually (and excludes residual maturity of medium- and long-term nonresident Indian accounts). The international investment position (IIP) statistics cover the sectors prescribed in the BPM6 and these data are disseminated within six months of the reference period in respect of annual data1. Coverage of direct investment positions data is hampered by the absence of appropriate legal or institutional authority. India began disseminating the Data Template on International Reserves and Foreign Currency Liquidity as prescribed under the SDDS in December 2001. The more up-to-date information on certain variables, such as total foreign reserves, foreign currency assets, gold, and SDRs, are available on a weekly basis and are disseminated as part of a weekly statistical supplement on the RBI web site.

6. Monetary and financial statistics: The RBI web site and the RBI Bulletin publish a wide array of monetary and financial statistics, including reserve money and its components, RBI’s survey, monetary survey, liquidity aggregates (outstanding amounts), interest rates, exchange rates, foreign reserves, and results of government securities auctions. In 2011, the RBI started publishing a weighted average lending interest rate and other lending rates at annual frequency. The frequency and quality of data dissemination have improved substantially in recent years.

7. Concepts and definitions used by the RBI to compile monetary statistics are in broad conformity with the guidelines provided in the Monetary and Financial Statistics Manual (MFSM). Nevertheless, the following concepts and principles deviate from the MFSM. First, the resident sector data do not provide sufficient information on the sectoral distribution of domestic credit. Specifically, under their present sectorization scheme, the authorities subdivide the resident nonbank sector data by (i) central government; (ii) state government; and (iii) the commercial sector (including other financial corporations, public and other nonfinancial corporations, and other resident sectors). Second, commercial banks add accrued interest to credit and deposit positions on a quarterly basis only (instead of the prescribed monthly basis).

8. The RBI reports monetary data for IFS on a regular basis. Since October 2006, the RBI has initiated the electronic reporting of monetary data, which is a major improvement from the previous paper-based reporting which was prone to errors and delays. India has also submitted to STA test data (starting from December 2001 data) on the Standardized Report Forms (SRFs) that have been developed to implement the methodology outlined in the MFSM. STA is working with the authorities in resolving the outstanding data issues on the development of the SRFs.

9. Government finance statistics: The Ministry of Finance (MoF) is responsible for compiling and disseminating the GFS. India reports the budgetary central government cash flow statement within one month after the reference month and stock of liabilities within one quarter after the reference quarter. With the agreement of the authorities, STA uses these data to compile a monthly cash flow statement for publication in the International Financial Statistics, following the GFSM 2001 presentation, with some missing breakdowns, particularly for expenditure. Data on fiscal performance at the state level are available only at annual frequency and with a considerable lag. Data on the functional and economic classification of expenditures are available with considerable lag. There is also scope to improve the analytical usefulness of the presentation of the fiscal accounts. For example, classification of government expenditure between developmental/nondevelopmental and plan/nonplan obscures the economic nature and impact of fiscal actions. The MoF reports central government data (on a cash basis) for publication in the Government Finance Statistics Yearbook (GFSY), the latest reported data corresponding to 2010. Two years after the reference year, the Ministry of Finance reports general government data to STA in the GFSM 1986 format, that staff reworks to the GFSM 2001 presentation for inclusion in the GFSY (latest reported data correspond to 2008). Data on the general government operations are not internationally comparable as they exclude data on the operations of the extra-budgetary funds, local governments, and social security funds. Under the SDDS, India disseminates annual general government data within 3 quarters after the reference year, using the timeliness flexibility option but meets the SDDS specifications for central government debt and operations.

India: Table of Common Indicators Required for Surveillance

As of December 4, 2013

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Daily (D), Weekly (W), Biweekly (BW), Monthly (M), Quarterly (Q), Annually (A), Irregular (I); Not Available (NA)

Includes reserve assets pledged or otherwise encumbered as well as net derivative positions.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state governments

Including currency and maturity composition


Low-income and special category states include: Bihar, Chhattisgarh, Jharkhand, Madhya Pradesh, Odisha, Rajasthan, Uttar Pradesh, and eight northeast states (Assam, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Sikkim, and Uttarakhand). IFC also includes West Bengal, but excludes Himachal Pradesh and Uttarakhand.


The IIP as published by the RBI values equity liabilities at acquisition cost, while the Fund uses market prices, resulting in substantial differences.