IMF Assessment places India on positive track but challenges remain

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Venkat Raman

Indians around the world will mark the independence of their motherland on August 15.

Festivities would include flag hoisting, rendition of patriotic songs, cultural programmes, ‘at home’ parties and much more.

Notwithstanding the oft-repeated criticism that successive federal governments have failed to address the real issues and lift the teeming millions from their subsistence levels, the progress achieved by independent India is not only commendable but also in many cases inimitable.

A few Western diplomats have told this writer that if India had the same population as the US, it would have risen far above the wealthiest nation on earth and become the destination for migrants from all parts of the world.

With its vast natural resources and inherent talent, the country would have had the potential to outgrow any nation on earth.

Democratic Ideals

And despite political intransigence between various groups, natural disasters, terrorist attacks and other forms of disturbance, democracy has grown to become an institution in the country and proudly the country’s tryst with self-government and government of the people, by the people and for the people has been successful.

True to the tenet of independent India’s first Prime Minister Jawaharlal Nehru’s philosophy of ‘Industrialise or perish,’ the economy features an array of manufacturing enterprises, adding value to its Gross National Product (GNP).

The country today produces almost everything-from apples to aircraft and from vegetables to vaccines. There is resilience and a mood for progress that is distinctly visible in India. And despite all those traffic gridlocks and other drawbacks, there is something to the country that stimulates passion and the urge to engage. It is little wonder that foreign investors and global corporates find themselves doing business with India and Indians on a scale that remains unprecedented and continues to grow.

IMF Assessment

The International Monetary Fund reported its assessment of the Indian economy on August 8, 2018. It contained not only economic predictions and indicators but a grand endorsement of the country’s performance over the past year.

Ranil Salgado, Head of the IMF team for India said that India’s economy is gaining momentum, thanks to the implementation of several recent noteworthy policies such as the enactment of the long-awaited Goods and Services Tax (GST) and the country opening up more to foreign investors.

“Therefore, we expect economic growth to pick up to about 7.3% for fiscal year 2018-2019, meaning that the year that runs from April 2018 through March 2019, from 6.7% in the year prior. Meanwhile, inflation has edged higher, in part due to a reduction of economic slack.

“To sustain and build on these policies and to harness the demographic dividend associated with a growing working-age population (which constitutes about two-thirds of the total population), India needs to reinvigorate reform efforts to keep the growth and jobs engine running. This is critical in a country where per capita income is about US$ 2000, still well below that of other large emerging economies,” he said.

While the long-awaited turnaround in investment demand is now occurring, the investment- GDP ratio was higher at 34.2% in 2014-2015, when GDP growth was 7.4%, indicating that consumption will continue to be a driver of growth.

Merchandise exports

According to the IMF, growth in merchandise exports will be strong at 13.2% during the current fiscal year, the highest rate of growth in exports since 2011-2012.

Perhaps the depreciation of the Indian Rupee may be a catalyst, but this is a bold call to make at a time of trade wars. Nevertheless that means, according to the IMF’s forecasts, all three engines of economic growth, namely consumption, investment and exports, will start firing from the current year.

“The GST created a unified national market for the first time, by lowering internal barriers to trade, effectively establishing a Free Trade Agreement for a market of more than 1.3 billion people. The tax is also expected to increase the amount of economic activity taking place in the formal sector of the economy, leading to better quality and more reliable jobs.

“As a result, the GST system should improve productivity and boost medium-term potential growth, while simultaneously creating room for the government to increase the much needed social and infrastructural spending,” the IMF Report said.


Photo Caption:

  1. The Indian National Flag symbolises Sacrifice, Purity and Progress
  2. The India Gate is a War Memorial at Rajpath on the Eastern Edge of the Ceremonial Axis of New Delhi


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