Amidst global slowdown, India remains the bright spot as it has shown the signs of favourable growth but the Government of India needs to pursue the task of structural reforms more effectively, feels the International monetary Fund(IMF).
The IMF has lowered the Indian growth to 7.3 percent from its earlier estimate of 7.5 percent. IMF’s resident representative in India, Thomas Richardson, said that “India is a bright spot but that is partly because other emerging markets are not so bright,”.
The recent cut in repo rate has indeed given a boost to the economy as front loading monetary easing is an effort to stock a slowing economy. India has taken various measures and has been able to bring down the inflation and fiscal deficit, but with increased government borrowing, the IMF says that India should reform taxes and reduce subsidies to ease out its budget deficit.
Finance minister Arun Jaitley has planned to cut fiscal deficit by 3.9 percent of GDP in this fiscal year ending march, and further reduce it to 3.6 percent of GDP in the 2016-2017 fiscal year. In past, India has managed its fiscal deficit by reducing expenditure thereby undermining the economic growth.
India expects to cut its subsidy cost of major commodities like fertilisers, oil, and food grain to 1.6 percent of GDP in 2015-2016 from 2.5 percent of GDP in 2012-2013. This major step is in line with falling global prices of the commodities.
India needs to revamp its financial sector and should make all effort to recover the bad loans in the banking sector. To invigorate the investment process, India needs to prioritise market-based pricing of natural resources along with the proper implementation of infrastructural projects.
Powered by Facebook Comments