India's growth momentum must continue despite elections: IMF

India's growth momentum must continue despite elections: IMF

The International Monetary Fund has said it wants continued momentum in India's growth and structural reforms despite the election period.

A number of elections are scheduled to be held in India within the next one year with assembly polls in Karnataka, Mizoram, Chattisgarh, Madhya Pradesh and Rajasthan as well as the 2019 Lok Sabha election.

"We are not saying that India's structural reform speed will slow down because of elections. What we are saying is that the growth momentum and the structural reform momentum should continue despite the election period," said Changyong Rhee, Director of the Asia and Pacific Department at the IMF.

India is projected to grow at 7.4% in the fiscal year 2018-2019 as the economy recovers from temporary destruction due to currency exchange initiatives and the roll out of the new goods and services tax, Rhee said on Friday.

Ken Kang, Deputy Director, at the IMF Asia and Pacific Department said the implementation of the GST was "a major reform" of the Indian tax system.

"In recent years, India has made impressive progress in reforms.. It (GST) will enhance the efficiency of intra-Indian movement of goods and services, help create a common national market as well as help boost jobs and growth," said Kang.

He said India's introduction of flexible inflation targeting and of a statutory monetary policy which has helped strengthen the monetary policy framework was another big achievement.

"The government has recently announced a major recapitalisation plan for the public-sector banks in order to accelerate the work out of non-performing loans, as well as made some important legal improvements through a new insolvency and bankruptcy law," said Kang.

"The IMF hopes that the reform momentum would continue," Kang added.

Looking ahead, said Kang, India needed to focus on labour market reforms with a focus on increasing formal female labour participation, to improve the business environment, and reduce complex regulations, but also to address supply bottlenecks, particularly in the agricultural sector and distribution networks.

Responding to a question, Kang said that the IMF expects India's role in the region to expand.

"India does have a room to expand its export orientation and to reduce further trade and non-trade barriers. The statutory tariff rate in India is relatively high at about 15% and higher than those in the rest of the region. So there is room to do more on trade reforms," he said. 

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