“India’s strong reform push in 2016 is welcome and should continue apace. Adoption of the goods and services tax is poised to boost India’s medium-term growth,” the International Monetary Fund (IMF) said in its latest Asia Pacific regional economic update presented at the ongoing annual fall meetings of the IMF and the World Bank here.
“As shown by India, progress on reforms could ignite business investment (including already strong FDI inflows), further boosting domestic demand,” the IMF said.
The multilateral lender projected India’s GDP to grow at 7.6 per cent in both 2016-17 fiscal as well as in and 2017-18 fiscal year, which is 0.1 percentage point higher than its April 2016 World Economic Outlook survey.
“Monsoon rainfall coming in at normal levels bodes well for agriculture and, along with a decennial rise in government employee salaries, will underpin the ongoing recovery in domestic demand,” the IMF report said.
“Further progress on reforms will boost sentiment, and the incipient recovery of private investment is expected to help broaden the sources of growth amid gradual fiscal consolidation and broadly neutral monetary policy,” it said.
“Medium-term growth has also been revised upward reflecting continued progress on structural reforms,” it added. IMF said India’s growth has continued to benefit from the large improvement in the terms of trade, positive policy actions, including implementation of major structural reforms, gradual reduction in supply-side constraints, and a rebound in confidence.
Government consumption is set to continue to support growth in 2016, it added. At the opening of the meetings here on Thursday, IMF Managing Director Christine Lagarde urged greater global trade integration, warning against tendencies of retreat from globalisation, or reverse globalisation, and multilateralism.
“A retreat from globalisation and multilateralism is a serious risk at a time when international cooperation and coordination are as critical as ever,” Lagarde said in her policy paper presentation.
“This persistent underperformance (global growth) has exposed complex underlying trends in many countries — including the difficulty for some groups to adjust to rapid changes in the global economy,” she said.