Suggesting the removal of long-standing structural bottlenecks to enhance market efficiency in India, the International Monetary Fund (IMF) in its regional economic outlook has said that the country’s growth is expected to rebound to 7.2 percent in the financial year 2017-18 and to further 7.7 percent in fiscal 2018-19, following disruptions caused by demonetization. It said that the temporary disruptions (primarily to private consumption) caused by cash shortages accompanying the currency exchange initiative are expected to gradually dissipate in 2017 as cash shortages ease.
The report said that growth in Asia is forecast to accelerate to 5.5% in 2017 from 5.3% in 2016, with growth in China and Japan revised upward for 2017, while growth is revised downward in India due to temporary effects from the currency exchange initiative and in South Korea owing to political uncertainty. As per the report, in India, improving productivity in the agriculture sector, which is the most labour-intensive sector and employs about half of Indian workers, remains a key challenge.
The IMF also said that more needs to be done to address long-standing structural bottlenecks and enhance market efficiency, including from liberalising commodity markets to giving farmers more flexibility in the distribution and marketing of their produce, which will help raise competitiveness, efficiency, and transparency in state agriculture markets. In addition, input subsidies to farmers should be administered through direct cash transfers rather than underpricing of agricultural inputs, as such subsidies to the agriculture sector have had large negative impacts on agricultural output.