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Wednesday 22 January 2020

IMF calls for banking reform to sustain Indian high growth rate

The IMF Board is tentatively scheduled to meet on 18 July for its annual India meeting

Washington: The International Monetary Fund (IMF) today suggested that India must carry out banking sector reforms; continue with fiscal consolidation, simplify and streamline GST; and renew impetus on reforms if it has to sustain the high growth rate trajectory.

India’s growth accelerated to 7.7% in the fourth quarter of Financial Year (FY) 2017-18. That was up from 7% in the previous quarter.

“We expect the recovery to continue in FY 2018-19. Growth is projected at 7.4% in FY 2018-19 and actually 7.8% in FY 19-20, respectively,” IMF Communications Director Gerry Rice told reporters at his fortnightly news conference.

In order to sustain the high growth rate, Rice suggested three steps for India to follow.

“One, to revive a bank credit and enhance the efficiency of credit provision; by accelerating the cleanup of the bank and corporate balance sheets and enhancing the government of public sector banks,” he said.

“Point two, to continue fiscal consolidation and to lower elevated public debt levels supported by simplifying and streamlining the goods and services tax (GST) structure,” he added.

He then suggested India renew impetus to reforms of key markets over the medium-term.

“And thirdly, over the medium-term, renew impetus to reforms of key markets, for example, labour and land, as well as improving the overall business climate would be crucial to improving competitiveness and again, maintaining that very high level of growth in India,” Rice said in response to a question.

The IMF Board is tentatively scheduled to meet on 18 July for its annual India meeting.

“We will be releasing the staff report in relation to that Board meeting and it will have detail (about GST),” he said when asked about simplifying and streamlining the goods and services tax structure.

“It (GST) is a complicated tax to administer and to implement, so I think some suggestions that streamlining can be important. There will be more on that in the context of the Article IV,” Rice said.

The IMF is scheduled to release on 16 July the update on World Economic Outlook.

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