The International Monetary Fund (IMF) has said that India is a source of growth for the global economy for the next few decades and it could be what China was for the world economy. It noted that the country now contributes, in purchasing power parity measures, 15% of the growth in the global economy, which is substantial. It added that spillovers from India are not that big because it is not a very open economy. The IMF views India as a ‘long run source of global growth’. Besides, the Fund suggested the country to take steps towards more structural reforms. It stated that steps to structural reforms have to continue and, in some ways, have to even take a step further up, and identified some key areas for continued reforms like labour reforms, improving the business climate and enhancing infrastructure.
The IMF said India has three decades before it hits the point where the working age population starts to decline. So that's a long time. This is India’s window of opportunity in Asia. It's somewhat only a few other Asian countries have this. It also said that the Indian economy is recovering from the two shocks that started from late 2016: demonetisation and then the kind of implementation issues related to the Goods and Services Tax (GST). Generally, India is benefiting from good macroeconomic policies; stability-oriented policies as well as some important reforms that have been done in recent years.
The IMF Executive Board in its report of annual consultations with India has forecasted the country’s growth to rise to 7.3% in FY2018/19 and 7.5% in FY2019/20, on strengthening investment and robust private consumption. Although there are short term issues, the IMF views that as a long-term major gain for India by implementing a national GST. It said in India it’s much more complex because the country has 29 states and union territories and it need agreement. It added that this was a great achievement.
The report stated that Insolvency and the bankruptcy code is the other big achievement. It said ‘We are seeing certain positive steps there and we hope that can continue’. The third big achievement is the inflation targeting framework that India now has in the Reserve Bank of India, formally adopted in 2016 but informally even earlier. It added that they have seen the benefits of that have lower inflation and inflation expectations. And then there are some of the key smaller steps like things to improve the business climate, steps to further liberalised FDI.
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