Reforms like the IBC impressed multilateral agencies, says IMF
New Delhi : The disruptive impact of demonetisation announced last year is a temporary phenomenon and the scrapping of the high-value currency would bring “permanent and substantial benefits”, according to the International Monetary Fund (IMF).
In an interview to CNBC TV18, IMF Economic Counsellor and Director of Research Maurice Obstfeld said that although demonetisation, as well as implementation of the Goods and Services tax (GST) caused short-term disruptions, both measures would bring long-term benefits. “The costs of demonetisation are largely temporary and we see permanent and substantial benefits accruing from the move,” Obstfeld said.
“Both demonetisation and the GST introduction will bring long-term benefits, though these caused short-term disruption,” he said, reports IANS. The IMF Chief Economist described GST as a “work in progress” to which the Indian economy is “gradually adjusting”. With businesses going into a “destocking” mode on inventories in anticipation of the GST rollout from July 1, sluggish manufacturing growth, among other factors, pulled down growth in the Indian economy during the first quarter of this fiscal to 5.7 per cent, clocking the lowest GDP growth rate under the Narendra Modi dispensation. Breaking a five-quarter slump, however, a rise in manufacturing sector output pushed the growth rate higher to 6.3 per cent during the second quarter (July-September) of 2017-18.
Furthermore Obstfeld also listed some of the reforms being undertaken by the Indian government that have impressed various multilateral agencies. “The government has taken important first steps like bringing in the Insolvency and Bankruptcy Code, which helped India improve its position substantially in the World Bank’s ‘Ease of Doing Business’ rankings,” he added.
