On 7 August 2018 the IMF published a report following consultations with India under article IV of the IMF’s articles of agreement.
India’s economic growth is forecast to rise to 7.3% in 2018/19 and rise further to 7.5% in 2019/20 with stronger investment and robust private consumption. The medium-term outlook will continue to improve with growth projected to rise to 7.75%. Structural policies are required to boost inclusive growth.
Economic include a further increase in international oil prices, tighter global financial conditions, a reduced cross-border integration including the spillover risks from a global trade conflict combined with regional geopolitical tensions. Domestic risks include to tax revenue shortfalls resulting from continuing delays and other issues in GST implementation and other structural reforms.
Continued fiscal consolidation is needed to reduce public debt. The IMF report emphasizes the need to reach the current year’s budget target and if necessary take corrective actions. India should enhance goods and service tax compliance and continue to simplify the framework.
India would also benefit from further liberalization of trade and foreign investment, and the IMF report welcomes the commitment to a multilateral rules based trade system.
It is important for India to modernise labour laws and regulations and to take other measures to help increase formal employment, especially employment of women. These measures could increase productivity growth and harness the demographic dividend from the large number of younger workers.
