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India's economy recovering, reforms vital, says IMF

The International Monetary Fund on Wednesday called the Indian economy a “bright spot” in the global landscape as one of the fastest growing big emerging market around.

business Updated: Mar 11, 2015 22:49 IST
Yashwant Raj

The International Monetary Fund Wednesday called the Indian economy a “bright spot” in the global landscape as one of the fastest growing big emerging markets around.

Projecting a growth rate of 7.25% for 2015-16 — compared to over-8% forecast by the Economic Survey — the fund said the Indian economy is growing faster than expected.

The growth figures show “economic recovery in India is underway … somewhat faster pace than we, and others, previously believed,” said Paul Cashin, fund’s India mission chief.

He added that if the structural reforms needed are introduced “there is certainly no reason why Indian could not resume 8, 9 or even higher growth path gong forward”.

India’s own growth projections have differed from the fund’s in the past, sometime leading to acrimonious exchanges with the Indian government publicly questioning the formula.

Numbers aside, the IMF’s report — officially called 2015 Article IV Consultation with India — is extremely bullish on the Indian economy and current policies.

“The Indian economy is reviving, helped by positive policy actions that have improved confidence and lower global oil prices,” said the fund in a statement.

Modi government’s Make in India initiative is “gaining momentum” though structural constraints to investment continue, and ease of business remained an issue.

And these, the fund said, were the key areas needing attention.

Bottlenecks in the energy, mining and power sectors

Increasing investment in infrastructure
Simplifying and expediting acquiring land and obtaining environmental clearances
Reforming the agriculture sector to bring greater efficienciesPDSm distribution and storage
Making labor markets more flexible
Improving education to meet rising shortages of skilled labor.
The fund noted current measures taken by the government and the RBI. And said though India remains vulnerable to global financial volatility, it is much better prepared than in 2013.