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India needs structural reforms to lift growth: IMF

The IMF Managing Director’s Global Policy Agenda (GPA) document released on Thursday said there is a need for countries including India to accelerate structural reforms to lift growth potential and ensure inclusiveness.

Written by Arun S | Washington Dc |
April 16, 2015 9:37:58 pm

Even as it termed India a “growth bright spot” among the emerging and developing economies, the International Monetary Fund (IMF) on Thursday said since the country – being a net oil importer — has been benefiting from lower oil prices, it should not fritter away the opportunity to carry out further reform of energy subsidies and increase essential social and infrastructure spending.

The IMF Managing Director’s Global Policy Agenda (GPA) document released on Thursday said there is a need for countries including India to accelerate structural reforms to lift growth potential and ensure inclusiveness. India should incentivise innovation and implement reforms to education, labour and product markets to raise competitiveness and productivity, it added.

Meanwhile, World Bank Group President Jim Yong Kim, in a press conference of the World Bank/IMF Spring Meetings 2015, complimented India for implementing diesel subsidy reforms and reducing barriers to foreign direct investment in telecoms, railways, and retail. The IMF GPA report lauded the new regulations introduced by countries including India, China and Indonesia to tackle risks arising out of a sharp rise in foreign currency funding and non-bank financial activities.

The IMF projections showed India’s growth at 7.5% in both 2015 and 2016, while the World Bank is projecting 7.5% and 7.9% in these two years for the country. As per the RBI’s projection, which takes into account oil prices at $55-65 per barrel for this year, India is expected to post a 7.8% growth in 2015-16, up from 7.5% last fiscal.

On the important issue of IMF quota and governance reforms, something that India has been actively pushing for , IMF managing director Christine Lagarde said it was disappointing that a major ratification by the US of the 2010 quota and governance reforms was still pending and that it has implications for the Fund resources and representation. The IMF said in 2010 it had agreed on wide-ranging governance reforms to reflect the increasing importance of emerging market countries including India. The reforms will produce a shift of 6% of IMF’s quota shares to dynamic emerging market and developing countries and this realignment will give more say to India, China, Brazil and Russia, the Fund said.

“I can fully understand why other member countries are frustrated and I am calling on the US government to ensure the ratification (by the US Congress),” Lagarde said. The GPA document said in the meantime interim steps on quota and governance reforms have been identified and the IMF’s Board of Governors have called on its Executive Board to expeditiously complete this work to enable the Board of Governors to reach agreement on such steps by end-June, 2015.

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