In a big boost to the government’s reform measures, the International Monetary Fund (IMF) in its annual assessment report for the country has raised its growth forecast for the current fiscal to 7.2 percent. Though, the global body called for steps to revitalise the investment cycle and accelerate structural reforms in the country, to continue on this trend. It said that by creating space for higher infrastructure spending, fiscal reforms can have a major impact on economic growth
The report further stated that the government has made strong efforts to put its public finances on a solid footing, with the fiscal deficit falling to 4.1 percent of the GDP in 2014-15, helped by lower oil prices. It also said that the Indian government’s efforts to improve the business climate has gained momentum, including with a “Make in India” campaign to attract investment
In its annual economic health check of the Indian economy, IMF said that while the country is well placed to cope with external shocks, there are possible risks on the horizon, both external and domestic and “Spillovers from weak global growth and global financial market volatility could be disruptive, including from any unexpected developments as the United States begins to raise its interest rates.” The IMF Board said that the main external risk facing India is a surge in global financial market volatility.
The report has also highlighted that the country needs to implement reforms in the key areas of energy, mining, power, infrastructure investment, land acquisition, environmental clearances, agriculture sector, labor markets and improving education. The report commended the RBI for its steps to tighten monetary policy by raising interest rates during 2013-14, and lauded the government’s efforts to contain food inflation, saying that Indian government’s “comprehensive policy initiatives”, have helped reduce India’s external vulnerabilities and improve the economic outlook.
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