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Substantial Structural Reforms Needed: IMF Tells India

IMF noted that addressing the downturn and returning to high growth requires urgent policy actions

New Delhi:

India needs to implement substantial structural reforms in the medium-term to enhance growth and come out of the slowdown, International Monetary Fund (IMF) India said in its 2019 Article IV Consultation-Staff Report.

“India’s substantial growth potential depends critically on implementation of growth-enhancing structural reforms”, it said.

The world financial body said, “We see several possible factors behind the slowdown”.

“The abrupt reduction in non-bank financial companies’ (NBFC) credit expansion and associated broad-based tightening of credit conditions appear to be an important factor.

Weak income growth, especially rural, has been affecting private consumption, and private investment has been hindered by the financial sector difficulties, including in public sector banks (PSBs) and insufficient business confidence,” the IMF said.

IMF further added that some implementation issues with important and appropriate structural reforms, such as goods and services tax (GST) may also have played a role in the slowdown.

The Staff Report, which was completed in early October will be further changed when the IMF releases its January update of the World Economic Outlook, it said.

The IMF noted that addressing the current downturn and returning India to a high growth path requires urgent policy actions.

The near-term policy mix needs to be mindful of supporting economic activity and restoring confidence, while recognizing significant fiscal constraints.

“In the medium-term, realizing India’s substantial growth potential depends critically on the implementation of growth-enhancing structural reforms. On the latter, we believe the government needs to reinvigorate the reform agenda, with evidence globally indicating it is important to take advantage of its new mandate early in its term”, it pointed.

Source: NDTV Profit