India’s economy looks weaker than the IMF projected earlier in January and the government needs to focus on more ambitious structural and financial sector reform measures, said Gerry Rice, communications director of the International Monetary Fund.

The government’s “accommodative fiscal stance” in the Union Budget of FY2020-21 is appropriate in an environment of weak economic activities but the focus should be on a medium-term fiscal consolidation strategy due to rising debt levels, noted Rice.

The IMF sharply cut India’s growth forecast for the FY20 to 4.8 percent last month from the 7.5 percent made in January 2019.

"While the budget touches on ongoing sectoral efforts, there remains an urgent need for more ambitious structural and financial sector reform measures and a medium-term fiscal consolidation strategy, anchored in tangible revenue and expenditure measures, especially given rising debt levels," Rice told reporters.

Finance minister Nirmala Sitharaman in the Budget 2020 revised India’s fiscal deficit target to 3.8 percent for FY20 from of 3.3 percent earlier. For FY21, the target has been set at 3.5 percent.

Recent data showed that India's factory production contracted in December, while January retail inflation remained at a six-year high of 7.59 percent. The manufacturing activity contracted by 0.3 percent, from a rise of 1.82 percent in November 2019 and of 2.5 percent during December 2018.