GST to increase India's growth in medium term: IMF

IMF suggested in its latest Asia Pacific regional economic update that India’s reform push in 2016 should continue apace, according to media reports. A rise in business investment that includes FDI inflows will also boost domestic demand.

The update noted that multiple Asian economies could benefit from a demographic dividend over the medium term with the rise in the working-age population in economies like India and Indonesia. This could help sustain strong potential growth.

The report has projected India’s GDP growth at 7.6 per cent for 2016-17 and 2017-18 fiscals. This is 0.1 per cent more than the 7.5 per cent growth projected by IMF’s April 2016 World Economic Outlook survey.

“Further progress on reforms will boost sentiment, and the incipient recovery of private investment is expected to help broaden the sources of growth amid gradual fiscal consolidation and broadly neutral monetary policy. Medium-term growth has also been revised upward reflecting continued progress on structural reforms (constitutional amendment enabling implementation of the national goods and services tax, adoption of inflation targets, and removal of foreign direct investment (FDI) ceilings),” says the report.

The report also pointed out that India’s growth has benefitted from the improvement in trade, positive policy actions, like implementation of key structural reforms, a rebound in confidence and gradual reductions of supply-side constraints.

Activity in some of the core industrial sectors has picked up and consumption growth has also remained strong. The report stated that government consumption will also continue to support growth in 2016.

China’s GDP growth is likely to remain strong and the report has projected the country’s growth to be 6.6 per cent in 2016 and 6.2 per cent in 2017. (KD)

Fibre2Fashion News Desk – India