By Lalit K JhaWashington, Oct 13 (PTI) India must prioritiseimplementation of public banking sector structural reforms,enhance the efficiency of labour and product markets, andmodernise agriculture sector to accelerate its growth, the IMFsaid today.
The country's growth is expected to accelerate in themedium-term as temporary disruptions due to demonetisation andthe Goods and Services Tax (GST) fade, the InternationalMonetary Fund said in its Asia and Pacific Regional EconomicOutlook Update.
The economic growth slowed in India in recent quartersdue to the temporary disruptions from the currency exchangeinitiative — demonetisation — that took place in November2016, and the recent rollout of the GST, it said.
The GST is a landmark tax reform that should help unifythe domestic market and encourage businesses to move from theinformal to the formal sector, the IMF noted.
Inflation has been low compared with the mid-point targetin recent months, driven by lower food prices, allowing thecentral bank to cut its policy rate in August, it added.
"Growth in 2017 was revised downward to reflect therecent slowdown, but is expected to accelerate in the mediumterm as these temporary disruptions fade," it said.
In India, growth was revised down to 6.7 per cent inFY2017 and to 7.4 per cent in FY2018.
"Growth will be underpinned by private consumption, whichhas benefited from low food and energy prices, as well ascivil service allowance increases," IMF said.
Headline inflation is projected to stay close to themidpoint of the target band (4 per cent ±2 per cent) inFY2017, while moving to the upper half of the target band inthe medium term as food prices recover, it said.
The current account deficit should remain modest,financed by robust foreign direct investment inflows, itnoted.
According to the outlook, in India, priorities should bestrengthening public banksÂ’ loss-absorbing buffers,implementing further public banking sector structural reforms,and enhancing public banksÂ’ debt recovery mechanisms.
"Reform efforts should aim at tackling supplybottlenecks, enhancing the efficiency of labour and productmarkets, and modernising the agricultural sector," the IMFsaid, adding that labour market reforms should be a priorityto facilitate greater and higher-quality job creation. PTI LKJNSA.
This is unedited, unformatted feed from the Press Trust of India wire.