Modi govt’s tight fiscal deficit line sensible: IMF
Modi govt’s tight fiscal deficit line sensible: IMF
Finance minister Arun Jaitley on Sunday expressed the hope that the government would be able to pass the landmark Constitution Amendment Bill on the Goods and Services Tax (GST) and the Bankruptcy and Insolvency Bill in the second half of the Budget Session starting on April 20.
“The current session of Parliament has already seen one landmark legislation two days ago. And I do hope to see another two passed in the second part of the session, with regard to the bankruptcy and insolvency laws and GST,” he said at the Advancing Asia Conference.
Speaking at the same event, IMF chief Christine Lagarde endorsed the Narendra Modi government’s tight fiscal deficit policy, calling it “sensible”, saying its emphasis on infra development was the right way to stimulate growth in the short term.
Ms Lagarde said Asian economies, led by India, will be a major growth driver in the coming years, and that better representation of the large emerging nations in the multi-lateral institution had transformed it from “my IMF to our IMF”. The IMF chief also praised Aadhaar, saying it will help to clean up the system.
Mr Jaitley noted that once GST and the bankruptcy and insolvency laws were passed, they will give a major push to the reform process. He said exhibiting determination to move on the reforms path, India can provide a significant amount of growth to the world. “We are trying to have special emphasis now, both in terms of legislative changes and resources being put to strengthen the banking system. I do feel the next few months, in bringing about structural change, are going to be extremely important,” he added. He noted the IMF had described India as a “bright spot” in the global economy.
Finance minister Arun Jaitley said there was an increased determination within the country to face challenges and accelerate the pace of reforms in order to continue to grow. “The constituency within India that supports reform is much bigger than those that oppose it. Our growth model is based on concerns to eradicate poverty,” he said at the Advancing Asia Conference here on Sunday.
The GST Bill has already been passed by the Lok Sabha and is pending ratification by the Rajya Sabha, where the ruling NDA does not have a majority. After it is approved by the Rajya Sabha, the legislation needs to be ratified by half of the 29 states in order to roll out GST.
IMF chief Christine Lagarde said that “the reform to transform” mentioned by Prime Minister Narendra Modi on Saturday at the conference was a clear sign that India was on the move using the backbone of digital innovation.
On quota reforms, Ms Lagarde said the large emerging market economies were now in the top 10 list of members, including India. The IMF had recently ratified quota reforms, giving more voting powers to emerging nations, including India. “It is clear to us that... (it is) Asia where growth is originating and going to come from India and in the years to come,” she said.
She termed India’s fiscal position as “appropriate and sensible”. Ms Lagarde added: “We consider that the fiscal stance adopted by India is exactly appropriate and a very sensible objective that has been set. It’s just the right one that has been set under the given circumstances.” She said the IMF also highly valued the investments being made in major infrastructure projects “because we believe it is the right way to stimulate short-term growth”. India being a net importer of oil and gas, it is using the windfall from low energy cost to finance infrastructure projects, which is the right stance from the IMF’s perspective.
Unconventional monetary policies of central banks in Europe and Japan received an endorsement from the IMF, even as policymakers from emerging markets including RBI chief Raghuram Rajan warned that such policies were increasing risks for the global economy. Ms Lagarde said countries should continue with unconventional monetary policies if they were accompanied by structural reforms and low inflation. “Monetary policy is needed but (it) cannot be the only game in town,” she added.
