AMN /Washington / New Delhi
The International Monetary Fund (IMF) has hailed the Prime Minister Modi Government’s decision of demonetisation and Goods and Services Tax (GST), saying the recent high frequent data suggest the economy has started to rebound already. But at the same time, the IMF has suggested for more reforms in the field of corporate and banking sector.
In a press conference in Washington, Deputy Director Asia Pacific Department of IMF, Kenneth Kang, said the favorable outlook for Asia was an important opportunity for India to push forward with difficult reforms. He said that corporate and banking sector weaknesses, continued fiscal consolidation through revenue measure, and improving the efficiency of labour and product markets. Mr Kanf said, “As such, there should be three policy priorities in the area of structural reforms.” He suggested accelerating the resolution of non- performing loans, rebuilding the capital buffers for the public sector banks, and enhancing banks’ debt recovery mechanisms. He also suggested that India should continue with the fiscal consolidation through revenue measures, as well as further reductions in subsidies.
“In India, growth rate in fiscal year 2017, was revised downward to 6.7 percent so it is a kind of exception for our revision for most of our other countries. Growth slowed in recent quarters, held back primarily by structural weakness in the corporate and banking sectors as well as transitory shocks from the November currency exchange initiative and the July Goods and Service Tax reform rollout. But still, I want to emphasize that this 6.7 percent growth rate which was the downward revision but is still very high growth rate compared to most other countries, and we expect India to return gradually to its medium-term growth path. And the recent high frequent data suggest the economy started to rebound already”.
Once again raising concerns on Labour laws, Mr Kand said that there was a need to reduce the number of labour laws which currently number around 250 across the central and the state level. He said, “We expect India to return gradually to its medium-term growth path. And the recent high frequent data suggest the economy started to rebound already.” He added that India’s growth slowed in recent quarters due to the temporary disruptions from the currency exchange initiative, demonetisation that took place in November 2016, and the recent rollout of the goods and services tax. On GST he said, “This tax is a landmark tax reform that should help unify the domestic market and encourage businesses to move from the informal to the formal sector. Growth in 2017 was revised downward to reflect the recent slowdown, but is expected to accelerate in the medium term as these temporary disruptions fade.”
IMF had revised India’s GDP growth rate downward to 6.7 percent in its last report. Mr Kang said, “Growth slowed in recent quarters, held back primarily by structural weakness in the corporate and banking sectors as well as transitory shocks from the November currency exchange initiative and the July Goods and Service Tax reform rollout. But still, I want to emphasise that this 6.7 per cent growth rate which was the downward revision but is still very high growth rate compared to most other countries, and we expect India to return gradually to its medium-term growth path.”
On China, he said that the region’s largest economy is expected to post a growth of 6.8 percent this year, and 6.5 per cent next. This year’s upward revision reflects continued strong infrastructure spending and resilience in the real estate sector in the first half of the year. On Japan, he said, “Japan enjoyed growth sustained above-potential for six consecutive quarters through the first half of 2017. The country is expected to grow to 1.5 per cent in 2017 driven by a pickup in external demand, as well as consumption supported by fiscal transfers.”