India's growth momentum must continue despite elections, says IMF
(Sourced from PTI)
The International Monetary Fund said it wants continued momentum in India's growth and structural reforms despite the election period. "We are not saying that India's structural reform speed will slow down because of elections. What we are saying is that the growth momentum and the structural reform momentum should continue despite the election period," said Changyong Rhee, Director of IMF's Asia and Pacific Department.
A number of elections are scheduled to be held in India within the next one year with assembly polls in Karnataka, Mizoram, Chhattisgarh, Madhya Pradesh, and Rajasthan and the 2019 Lok Sabha election. India is projected to grow at 7.4% in the fiscal year 2018-2019 as the economy recovers from temporary destruction due to currency exchange initiatives and the GST roll-out, Rhee said.
Ken Kang, Deputy Director at IMF Asia and Pacific Department, said the implementation of the GST was "a major reform" of the Indian tax system. "In recent years, India has made impressive progress in reforms. It (GST) will enhance the efficiency of intra-Indian movement of goods and services, help create a common national market as well as help boost jobs and growth," said Kang.
Kang said India's introduction of flexible inflation targeting and statutory monetary policy, which helped strengthen the monetary policy framework, was another big achievement. "The government has recently announced a major recapitalization plan for the public-sector banks in order to accelerate the work out of non-performing loans, as well as made some important legal improvements through a new insolvency and bankruptcy law," added Kang.
Kang said India needs to focus on labor market reforms, especially to increase formal female labor participation, improve the business environment, reduce complex regulations, and also to address supply bottlenecks, particularly in the agricultural sector and distribution networks.
Kang said IMF expects India's role in the region to expand. "India does have a room to expand its export orientation and to reduce further trade and non-trade barriers. The statutory tariff rate in India is relatively high at about 15% and higher than those in the rest of the region. So there is room to do more on trade reforms," he added.