Cites IMF report for major progress
The Indian economy has come a long way in the last four years, Finance Minister Arun Jaitley wrote in a blog post on Sunday, saying that the International Monetary Fund (IMF) report on India in 2018 had noted improvements in indicators such as inflation, fiscal deficit, current account deficit, infrastructure, power sector, and allocation of natural resources.
“An analysis of what the IMF had to say in 2014 as against 2018 is very clear — high inflation, high fiscal deficit, high current account deficit, a standstill infrastructure, power sector, allocation of natural resources,” Mr. Jaitley wrote. “The last four years have seen a series of reforms, both legislative and otherwise…“The system has been substantially cleaned up and made more transparent. Decisiveness has led to easier decision making and made the economy stand out before several other countries.”
The IMF report, however, also had a segment on the impact of demonetisation, an assessment of GST implementation, and an analysis of the government’s banking reforms.
“The abrupt money supply shock due to cash shortages (following the demonetisation announcement) exacerbated the growth slowdown,” the report said.
“Uncertainty and disruptive cash shortages put a damper on consumer and business sentiment. As a result, high frequency indicators for consumption (e.g., sales of two-wheelers) and production (e.g., industrial production, manufacturing and services PMI, and production of cement) saw strong declines.
“The impact on growth appears to have been more severe and longer-lasting than anticipated…with a disproportionate impact on the informal sector,” the report added.
“The Government of India (GOI) is undertaking a significant recapitalisation of PSBs to enhance regulatory capital and provide “growth capital” to boost lending to the economy,” the IMF said.
“The Banking Reforms Roadmap, announced alongside the recapitalisation, lacked details on measures to improve PSB governance and operations. The plan’s impact on banks’ credit provision is unclear and implementation delays have been costly.”
Meanwhile, the Congress criticised Mr. Jaitley’s claims in his blog post. In a series of tweets, the Congress media in-charge, Randeep Surjewala, said the economy had been left in dire straits.
“Jaitley ji should know that Modi Govt had inherited an economy that was on the upswing. But due to BJP’s adhoc and myopic economic policies — demonetisation, flawed implementation of GST and tax terrorism — that momentum was lost.”