IMF: India’s reforms starting to pay off

NEW DELHI: India is on track to hold its position as one of the world’s fastest-growing economies as reforms start to pay off, according to the International Monetary Fund (IMF).

The US$2.6 trillion (RM10.4 trillion) economy was described by Ranil Salgado, the IMF’s mission chief for India, as an elephant starting to run, with growth forecast at 7.3 per cent in the fiscal year through March 2019 and 7.5 per cent in the year after that.

The nation accounted for about 15 per cent of global growth, according to the Washington-based fund.

Key risks flagged by the IMF in its annual Article IV assessment of the economy included higher oil prices, tightening global financial conditions and tax revenue shortfalls.

Authorities should take advantage of stronger growth to bring down debt levels, simplify the consumption tax system and continue to gradually tighten monetary policy, it said.

The government is due to release gross domestic product data on August 31 for the three months ended June. A high growth rate may not resonate with voters in elections next year as they continue to face issues such as unemployment and farm distress.

There are other risks. The rupee has plunged seven per cent against the US dollar this year, the worst performer among major Asian currencies.

Continuing structural reforms would be key to high growth, said Salgado.

Further rationalisation of the Goods and Services Tax would give maximum benefits, and labour reforms would be an incentive for companies to expand, he added.