NEW DELHI: India’s economy may not see recovery any time soon going by high-frequency indicators, International Monetary Fund chief economist Gita Gopinath said while advocating “important reforms” for land acquisition and labour laws to get its manufacturing going and becoming part of the global value chain.
Gopinath also wanted India to pursue fiscal consolidation path with consolidated fiscal deficit of state and Centre being the highest in the G-20. “Our expectation was that the first two quarters of fiscal 2019-20 would be a slowing scenario and then there would be an uptick in the third and the fourth quarter. But, looking at some of the high frequency indicators, we’re not seeing the kind of uptick we were projecting,” Gopinath told the FICCI annual general meeting on Friday.
She pointed out that after witnessing a sharp weakness in investment, the country is seeing weakness in consumption growth. She said the IMF will be revising the numbers again in January when it puts out an update.
Gopinath said India will need to pursue the clean-up of the banking sector as also take steps to boost rural incomes while focussing on macroeconomic stability.
Pointing at the continued stress in nonbanking finance companies and slow transmission of policy cuts, Gopinath also stressed the need to fix problems on the financing side and for creating a positive sentiment towards investment.
“For India, macroeconomic stability is very important, which means stability on the fiscal front. A clear sense of keeping to the target of fiscal consolidation is very important. That would require increasing revenue mobilisation and also rationalising expenditure,” Gopinath said.
India has pegged FY20 fiscal deficit target to 3.3% of GDP. The India-born economist, however, said fiscal deficit consolidation is seen as a medium-term target and not something that needs to be addressed overnight. For reforms, greater clarity and certainty would help, she said. “This is also applies to big reforms like the GST (goods and services tax).”
Gopinath said another set of big reforms are required to get manufacturing on the ground and for India to have bigger presence on the export front. There are important reforms needed with respect to land acquisition and labour laws.
Source: Economic Times