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    Home / News / India News / India seems to be recovering from demonetization disruptions: IMF
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    India seems to be recovering from demonetization disruptions: IMF

    India seems to be recovering from demonetization disruptions: IMF

    By Rajashree Seal
    Mar 11, 2018
    03:52 pm

    What's the story

    The International Monetary Fund (IMF) on Sunday said that the Indian economy now seems to be on its way to recovering from disruptions caused by demonetization and roll-out of goods and services tax (GST).

    At the same time, the IMF has also underscored the significance of reforms in other key sectors like education, health and improving the efficiency of the banking and financial systems.

    Economy expansion

    The expansion of Indian economy in recent years

    Deputy Managing Director of IMF Tao Zhang said, "India's economy has expanded strongly in recent years, thanks to macroeconomic policies that emphasize stability and efforts to tackle supply-side bottlenecks and structural reforms. Disruptions from demonetization and the rollout of GST did slow growth."

    "However, with the economy expanding by 7.2 percent lately, India has regained the title of the fastest-growing major economy," Zhang said.

    Benefits

    India's growing economy a 'welcome change'

    Calling this development a "welcome change", Zhang said the growth prospects remain positive.

    Ahead of his visit to India, the IMF official said that the Indian economy would benefit from further reforms, like education, improving the efficiency of the banking and financial system and others.

    This would support durable and inclusive growth and enable India to move toward the income levels of wealthier countries.

    Demonetization & GST

    It was inevitable that demonetization would temporarily affect economic activity

    Given the dominance of cash in everyday transactions in the Indian economy, it was inevitable that demonetization would temporarily affect economic activity, said Zhang.

    GST rollout last year was a landmark accomplishment that can be expected to enhance the efficiency of intra-Indian movement of goods and services, create a common national market, enhance tax buoyancy, and boost GDP growth and job creation, he said.

    GST rollout

    GST implementation also resulted in short-term disruptions

    "Yet the complexities and glitches in GST implementation also resulted in short-term disruptions. As I mentioned earlier, the economy now seems to be on its way to recovering from those disruptions," Zhang said.

    About the latest Indian budget, which many critics say is protectionist in nature, Zhang said IMF research indicates that tariffs are broadly contractionary, reducing output, investment, and employment.

    Details

    Zhang is travelling to India, Bhutan from March 12- 20

    Noting that IMF and India have close relations and have always been good partners, Zhang said his visit is a reflection of this partnership.

    "My visit is an opportunity to exchange views with the Indian authorities, senior RBI officials, and representatives from Indian business community and civil society," he said.

    Zhang will have a presentation on financial technology at the National Stock Exchange, India.

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