Indian economy remains a bright spot in global landscape: IMF

The Dollar Business Bureau

India’s economy continues to be a bright spot in the world in spite of some temporary hurdles like demonetisation, a senior official of International Monetary Fund (IMF) said.

IMF, in its yearly country report on India, on Wednesday said that the country’s expected growth is at 6.6% in the current fiscal year and at 7.2% in the next fiscal.

“The Indian economy is growing strongly and remains a bright spot in the global landscape,” said Paul Cashin, the IMF mission chief for India.
Cashin said the falling of global crude prices to half that began in the second half of 2014 had boosted the economic activity in India, which further enhanced the fiscal position and external current account, and also helped in lowering inflation.

Besides, constant fiscal consolidation, by cutting down government deficits and accumulation of debt, and anti-inflationary stance on monetary policies have helped in cementing macroeconomic stability, he said.

Mentioning that the Indian government has made considerable progress on key economic reforms that will help in furthering strong and sustainable growth, he said that the implementation of the proposed goods and services tax (GST) will help in raising the medium-term growth of India to above 8%.

GST will improve the production efficiency and goods and services movement across all the Indian states, he added.

“A major concern is the health of the banking system in India, which is still coping with huge amounts of bad loans, as well as increased corporate vulnerability in various sectors of the economy.”

On demonetisation, Cashin said that the huge shortage of currency has disrupted economic activity.

He, however, said that the Government of India seems to have taken steps to improve payment disruptions, like temporarily permitting the use of old notes for purchasing fuel and agri-inputs, which have supported in mitigating the negative effect.

“So we expect the slowdown to be limited and relatively short-lived and the financial system to come through unscathed. Of course, potential loan repayment risks should be monitored carefully, particularly given an already elevated level of non-performing loans,” he said.