IMF to India: Launch more reforms for faster growth

RSTV Bureau

imfIn its latest forecast related to India’s growth, the IMF has recommended that India should launch another phase of economic reforms and improve its business climate for achieving faster and more inclusive growth.

IMF has said this at a time when India’s projected growth rate for the rest of 2015 has dropped from 7.5 per cent to 7.3 per cent.

“In India, while several policy actions have been taken recently, further steps in relaxing longstanding supply bottlenecks, especially in the energy, mining, and power sectors, as well as labour and product market reforms, and improving the business climate are crucial to achieving faster and more inclusive growth,” the IMF said.

In its Asia and Pacific Regional Economic Outlook Update released in Peru on the sidelines of the annual fall meeting of the IMF and World Bank, the IMF projected India’s growth rate for 2016. It maintained the same rate of 7.5 per cent for 2016 as it had said in its April report.

“GDP is expected to grow at 7.3 per cent in 2015 (0.2 percentage points lower than in the 2015 April WEO), rising to 7.5 per cent in 2016 (unchanged from the 2015 April WEO),” the report said.

“With the revival of consumer and business sentiment, the incipient recovery of investment is expected to contribute more to growth going forward,” it said.

“In addition, higher public infrastructure investment and government initiatives to unclog raw material linkages and support the lending capacity of Indian banks should help crowd-in private investment,” the IMF said.

“Although lower oil prices are supportive of domestic demand, weakened exports as well as headwinds from weaknesses in India’s corporate and bank balance sheets will weigh on the economy,” it added.

In India, the IMF said the growth recovery has continued, supported by a pickup in domestic demand, on the back of strengthening industrial production and fixed investment. Lower global oil prices have also boosted economic activity in India and underpinned a further improvement in the current account and fiscal position and a sharp decline in inflation.

“Forward-looking indicators such as the manufacturing and services Purchasing Managers’ Indices (PMIs) indicate improving activity. However, export growth dropped sharply in the first half of 2015, partly reflecting subdued global demand,” the report said.

(With inputs from PTI)