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IMF / INDIA ECONOMY
STORY: IMF/ INDIA ECONOMY
TRT: 02:42
SOURCE: IMF
RESTRICTIONS: NONE
LANGUAGE: ENGLISH / NATS
DATELINE: 02 MARCH 2016, WASHINGTON DC / RECENT
RECENT-WASHINGTON DC
1. Wide shot, exterior, IMF building
2. Close up, IMF seal
02 MARCH 2016, WASHINGTON DC
3. SOUNDBITE (English) Paul Cashin, Mission Chief to India, IMF:
“India has a very good outlook at the present time. From the low point, which was growth of about 5-1/2 percent a couple of years ago, they’re now, we’re predicting, growth of about 7.3 percent for this fiscal year, rising a little bit to 7-1/2 percent next fiscal year. India certainly benefited from low oil and energy prices as one of the world’s largest oil importers, and that’s raised the real incomes of all Indians. Also, they’ve done some positive policy actions in terms of introducing inflation targeting, better targeting subsidies, and also some land and labor market reforms.”
RECENT - HYDERABAD, INDIA
4. Close up, fuel nozzle in gas tank
5. Wide shot, gas station
02 MARCH 2016, WASHINGTON DC
6. SOUNDBITE (English) Paul Cashin, Mission Chief to India, IMF:
“In these volatile times no country is immune from both internal and external shocks. The main internal risk for a country like India comes from weak corporate and bank balance sheets. There has been a big increase in nonperforming loans at the present time due to the previous shortfalls in investment, so that’s a concern, but we think it’s a moderate concern and one that they’ll be able to manage with better regulation and supervision from the Central Bank. On the external side, of course, we’ve seen a big uptick in global financial volatility in recent times. India will not be immune from that, but they’re in the best-placed position among emerging economies to withstand that. And we think, given their much smaller current account deficit and healthy FDI flows, that they’ll be able to ride their way through this.”
RECENT - HYDERABAD, INDIA
7. Various shots, people at bank
02 MARCH 2016, WASHINGTON DC
8. SOUNDBITE (English) Paul Cashin, Mission Chief to India, IMF:
“India’s implemented a lot of beneficial policies in the recent past, but the number one policy that we would look to, to have them implement, is to introduce the goods and services tax, which will not so much be a revenue-raiser, but it will lower trade barriers across the 29 states of India and give a fill-up to growth as well. We would also like to see them lower land and labor market regulations and also finally tackle agricultural reforms, both in the storage, handling, and distribution of food, which will also help keep food inflation down, which is obviously a big issue in a country like India where food is 60 percent of their consumption basket.”
RECENT - HYDERABAD, INDIA
9. Med shot, people at market
10. Med shot, man counting money
Positive policy actions together with the decline in oil prices have helped make India one of the fastest-growing large economies in the world. Its resilience, however, is being tested by an unfavorable global environment and a slow investment recovery, says the IMF in its annual assessment of the Indian economy.
“India has a very good outlook at the present time. From the low point, which was growth of about 5-1/2 percent a couple of years ago, they’re now, we’re predicting, growth of about 7.3 percent for this fiscal year, rising a little bit to 7-1/2 percent next fiscal year. India certainly benefited from low oil and energy prices as one of the world’s largest oil importers, and that’s raised the real incomes of all Indians. Also, they’ve done some positive policy actions in terms of introducing inflation targeting, better targeting subsidies, and also some land and labor market reforms,” said Paul Cashin, head of the IMF team for India.
India’s growth recovery also reflects improved economic management. The government has taken policy measures to help reduce fuel and fertilizer subsidies, bolster the financial system, and strengthen the business climate, all of which have helped enhance confidence in the economy.
As a result, India’s growth outlook is favorable, with GDP growth projected to strengthen from 7.3 percent in this fiscal year (2015/16) to 7.5 percent in the upcoming fiscal year.
Even so, the economic recovery has been uneven. The pick-up in the investment cycle is yet to gain strength, the banking system is weighed down by bad loans, and the weaker global economy has hit India’s exports. There are also external risks.
“In these volatile times no country is immune from both internal and external shocks. The main internal risk for a country like India comes from weak corporate and bank balance sheets. There has been a big increase in nonperforming loans at the present time due to the previous shortfalls in investment, so that’s a concern, but we think it’s a moderate concern and one that they’ll be able to manage with better regulation and supervision from the Central Bank. On the external side, of course, we’ve seen a big uptick in global financial volatility in recent times. India will not be immune from that, but they’re in the best-placed position among emerging economies to withstand that. And we think, given their much smaller current account deficit and healthy FDI flows, that they’ll be able to ride their way through this,” Cashin said.
As private investment continues to show only a few signs of revival, the challenge for India is to sustain its growth momentum. This can only be achieved by pushing through further structural reforms. With a still-high fiscal deficit and inflation risks, there is limited policy space to boost demand. An increase in public infrastructure investment and government initiatives to unclog stalled investment projects are helping bolster investor sentiment and having a positive impact on private investment.
“India’s implemented a lot of beneficial policies in the recent past, but the number one policy that we would look to, to have them implement, is to introduce the goods and services tax, which will not so much be a revenue-raiser, but it will lower trade barriers across the 29 states of India and give a fill-up to growth as well. We would also like to see them lower land and labor market regulations and also finally tackle agricultural reforms, both in the storage, handling, and distribution of food, which will also help keep food inflation down, which is obviously a big issue in a country like India where food is 60 percent of their consumption basket,” Cashin said.
India has a very young and dynamic workforce, and needs to create sufficient jobs for the roughly one hundred million young Indians who will enter the job market in the coming decade.
While India has made steady progress in recent years, raising India’s growth rate and ensuring the creation of sufficient jobs will require deeper efforts in coming years.
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