Structural reforms key for India growth: IMF, WB
Structural and financial sector reforms, fiscal consolidation and quality exports are key factors that enable India’s GDP growth, according to multilateral agencies World Bank (WB) and the International Monetary Fund (IMF).While in the near-term, continued fiscal consolidation is needed to reduce public debt, GST compliance should be further strengthened besides reducing subsidies, noted IMF’s World Economic Report released Tuesday.
Important steps have been taken to strengthen financial sector balance sheets, including through accelerated resolution of non-performing assets under a simplified bankruptcy framework. These efforts should be reinforced by enhancing governance of public sector banks, it noted.
According to IMF, the lender of the last resort, labour reforms including regulations on hiring and dismissal could help incentivise job creation, while land reforms will facilitate infrastructure development.
Provided structural reforms are implemented, besides easing infrastructure bottlenecks, India’s growth is expected to stabilise over 7 per cent in the medium term. Trade tensions between India and the US aren’t ruled out, though India postponed retaliatory tariffs on US products in response to US tariffs on steel and aluminum imposed last year and the withdrawal of Generalised System of Preferences, which gave 2,000 Indian products duty-free access to the US. Also, following the Pulwama incident, bilateral trade between India and Pakistan barely touched $2.4 billion, though the negative effects were limited.