The Indian economy has been facing an unprecedented slowdown for the past two years despite infusing massive liquidity through various means at the government level. India’s economic growth decelerated to 4.5% in the September quarter, its slowest pace since March 2013.

The International Monetary Fund (IMF) has come out with a warning to India, stressing that the country must take steps quickly, to reverse the economic slowdown.

Declining consumption and investment, and falling tax revenues, have combined with other factors to put the brakes on one of the fastest-growing economies in the world, the IMF said in its annual review.

After lifting millions out of poverty, India was in the midst of a significant economic slowdown, Ranil Salgado, of the IMF Asia and Pacific Department, said. “Addressing the current downturn and returning India to a high growth path requires urgent policy actions.”

IMF chief economist Gita Gopinath, who met Indian Prime Minister Narendra Modi on 23 December, said last week that regulatory uncertainty had played a major role in the economic slowdown in India.

“Regulatory uncertainty is another factor that needs to be addressed. It is important for India to take up reforms, but to be able to do this with greater clarity and greater certainty would help," Gopinath said.

​India’s Gross Domestic Product growth touched a six-year low at 4.5 per cent in the July-September quarter, while retail inflation shot up to a three-year high of 5.54 per cent in November, jeopardising any chances of an interest rate cut.

In October, the International Monetary Fund (IMF) lowered growth projections for the Indian economy by 90 basis points to 6.1 per cent; for a second time in seven months, in its latest World Economic Outlook.