The International Monetary Fund has expressed concern about India’s economic downturn and called for “urgent steps” to return the country to growth.

In its annual review, the IMF observed that declining consumption and investment, as well as falling tax revenue, had combined with other factors to put the brakes on one of the fastest-growing economies in the world.

Ranil Salgado of the IMF Asia and Pacific Department has said that after lifting millions out of poverty, “India is now in the midst of a significant economic slowdown” and urgent policy action was needed to help the country return to high growth.

However, he felt the slowdown was mostly cyclical and not structural and felt a recovery would not be quick. But he refused to call it a crisis.

The IMF wants India to continue with sound macroeconomic management and hopes the new government with its strong mandate will reinvigorate the reform agenda to boost inclusive and sustainable growth.

Last week IMF chief economist Gita Gopinath said the fund was set to significantly downgrade its growth estimates for the Indian economy in the World Economic Outlook, which will be released next month.

Salgado also concurred with this view. In October, the IMF slashed its forecast for 2019 by nearly a full point to 6.1%, while cutting the outlook for 2020 to 7%.

Salgado said India’s central bank had “room to cut the policy rate further, especially if the economic slowdown continues.” The Reserve Bank of India has this year cut the key lending rate five times to a nine-year low.

However, at its last meeting earlier this month the central bank defied expectations by keeping policy unchanged.

The RBI slashed its annual growth forecast to 5% from 6.1%, as consumer demand and manufacturing activity contracts. India’s economy grew at its slowest pace in more than six years in the July-September period, down to 4.5% from 7% a year ago, according to government data.

Salgado called for restoring the health of the financial sector to “enhance its ability to provide credit to the economy.”

Salgado felt the current slowdown was due to the abrupt reduction in credit expansion for shadow bankers and the associated broad-based tightening of credit conditions appears to be an important factor.

Moreover, weak income growth, especially in rural areas, has hit private consumption. He also felt that poor implementation of structural reforms, such as the nationwide goods and services tax, may also have played a role.

The IMF official, however, expressed satisfaction over the fact that reserves have risen to record levels and the current account deficit has narrowed. He felt the issue was primarily how to address the growth slowdown.

In the short term, he said, the most critical thing was carrying out reforms in the financial sector.

Earlier, Prime Minister Narendra Modi’s former chief economic adviser Arvind Subramanian, who teaches at the Harvard Kennedy School in the US, stated in an academic paper that the Indian economy was going through a “great slowdown.”

Subramanian said the Indian economy was now experiencing a “second wave” of the Twin Balance Sheet crisis, which was behind the slowdown. He described the crisis as debts accumulated by private corporates becoming the non-performing assets of banks.

Also Read: India facing ‘great slowdown, says economist

According to Subramanian, the first wave of this crisis happened when bank loans extended to steel, power and infrastructure sector companies during the investment boom of 2004-11 turned bad. The second crisis largely occurred after the demonetization of high-value currency notes. It involved the shadow banking sector and real estate firms.

Former central bank governor Raghuram Rajan said he was concerned about the state of India’s economy and urged the government to decentralize power, focus on rural poverty alleviation and stimulate private spending.

Rajan said India was in the midst of a “growth recession” with signs of a deep malaise in the economy.

Also Read: India facing growth recession, says ex-RBI chief