Beijing : Structural reforms, including GST and in areas like land and labour, will be key to boost India’s economic growth potential going forward, the International Monetary Fund (IMF) said. “India’s growth outlook is favourable, with GDP growth projected to strengthen to 7.5 per cent in the current fiscal year, even in the absence of major structural reforms,” said Ranil Manohara Salgado, Chief of Regional Studies Division, Asia and Pacific Department of IMF.
IMF released its Regional Economic Outlook for Asia and Pacific in Hong Kong in which it forecast that economies of China and Japan were expected to further slowdown sharply over the next two years but Asian growth will remain strong due to domestic demand despite weak global trade.
While the growth outlook looked favourable for the Indian economy, implementation of further structural reforms like Goods and Services Tax, (GST), which are stuck in the Parliament is a priority, Salgado told PTI. “Nonetheless, implementation of GST is a priority, as it would create a single national market, enhance the efficiency of intra-Indian movement of goods and services, and boost GDP growth further,” he said.
Other major reforms, those in the power sector, on land acquisition, in labour markets, and in general to strengthen the business climate, will also be important to increasing India’s growth potential, he said. On the Foreign Direct Investment(FDI) shifting to India in view of its growth potential, Salgado said as a result of several steps taken by the Indian government, the FDI inflows to India are picking up. “Several steps have been taken in recent years by the Government of India to liberalise and simplify the FDI regime, including raising the ceilings on FDI in many sectors of the Indian economy,” he said.
Indeed, partly as a result of these and other reforms, total FDI inflows to India increased to USD 44 billion in 2015, or 2.1 per cent of GDP, up from USD 34 billion in 2014, or 1.7 per cent of GDP, which is an encouraging sign, he said. “Nonetheless, a more conducive business environment is necessary to attract greater FDI into the manufacturing sector and help the success of Make in India initiative,” he said.
On China’s economic slowdown, Salgado said Chinese economy which slipped to 6.9 per cent last year will further weaken to around six per cent in the next three years.
The IMF retained its growth forecast for India this year at 7.5 per cent, largely driven by private consumption even as weak exports and sluggish credit growth weigh on the economy.
India’s growth momentum is expected to be underpinned by private consumption, which has benefited from lower energy prices and higher real incomes, IMF said and called on the policymakers to speed up the structural reform implementation.