The Indian economy is on a solid growth track in the medium and long term due to the structural reforms undertaken by the government, and the current slowdown due to implementation of the goods & services tax (GST) and demonetisation is short term, International Monetary Fund (IMF) chief Christine Lagarde has said.
The IMF on Tuesday lowered India’s growth forecast for 2017-18 to 6.7% from its earlier estimate of 7.2%, citing lingering impact of demonetisation and transition cost to GST. But, India is expected to regain the fastest growing major economy tag next year when it is forecast to grow 7.4% (slower than earlier estimate of 7.7%), higher than China’s 6.5%. IMF also expects the Indian economy to grow 8% in the medium term on the back of reforms undertaken so far.
“We have slightly downgraded India. However, we believe that India is on a growth track for the medium and long term, that is much more solid as a result of the structural reforms that have been conducted in India in the last couple of years,” Lagarde told a news conference in Washington, DC.
“Now, of course the demonetisation that took place, of course collapsing 40 different taxes into one single GST is a monumental effort and given the implementation associated with, it is hardly surprising that there is a little bit of a short-term slowdown as a result but for the medium term we see a very solid track ahead of the Indian economy,” she said.
Lagarde was confident that jobs would be created in India on the back of reforms unveiled by the government. The Narendra Modi-led government has faced criticism after growth slowed to a three-year low of 5.7% in the June quarter, prompting the PM to slam critics for spreading what he called was “pessimism”.
“The (fiscal) deficit has been reduced, inflation is down significantly and the structural reforms will deliver jobs the Indian population, particularly the young Indian people, expect in the future,” the IMF chief said indicating a strong support for the government’s reforms agenda.