Free Press Journal

IMF good chit must not go to our head


The Narendra Modi government has got so much flak over demonetisation of high value currency and the Goods and Services Tax from economists, politicians and analysts that when the International Monetary Fund (IMF) and World Bank shower wholesome praise on these two measures, it evokes surprise and scepticism. There can be two reasons for the massively negative narrative on both these within the country—the fact that any negative and sensationalist news is lapped up in today’s environment and second that there were mistakes made in implementation which were quite appalling but which did not come to the notice of the two international bodies.

To the government’s credit, Finance Minister Arun Jaitley has extraordinary skills of articulation and his presentation at the IMF-World Bank joint meeting swept them off their feet. In fairness to the government, it must also be said that when both the measures were rolled out, the government had warned that they would have short-term effects of dampening growth so such a hue and cry over the dip in the growth rate should not have evoked the kind of panic that it did.

Yet, it would be unfair to ascribe ignorance to the IMF when its chief, Christine Lagarde while lowering the growth forecast for this year and next year says that the Indian economy is on a “very solid track” in the middle term and that “there is only a little bit of a short-term slowdown” as a result of demonetisation and GST due to “structural reforms that have been conducted in India in the last couple of years.” At a separate media conference Jaitley put up a spirited defence when he said in Washington: “When the world was growing at two-and-a-half per cent, India was the fastest-growing major economy in the world. That was a time to really fix the roof. You don’t have to wait for a downward slide in order to do it.” He added: “I think, this was just the right time to bring about structural changes.”

Railing against the Congress the Finance Minister said: “Attacking or ending this black money was never a priority for the Congress. So their concern (about demonetisation) is natural. And GST was a Congress move. But since (the Congress) party is an opportunist party, it is opposing it.” While Jaitley is entitled to his point, it would be gravely misplaced if he and the government at large slip into complacency and a sense of denial. A lot of work needs to be done even assuming that in principle demonetisation and GST were unimpeachable measures. That GST is being fine-tuned is heartening. Relentless work is needed to make it functionally efficient and responsive to the practical imperatives.