GST to push India’s growth but bad loans still a problem: IMF

Source: The Hitavada      Date: 29 Apr 2017 13:06:32


WASHINGTON,

IMF believes that India will continue to grow at a fast pace, with a projected 6.8 per cent rate for Financial Year 2016-17 and 7.2 percent in 2017-18

GST will help raise India’s medium-term growth to above 8 percent, as it will enhance production and the movement of goods and services across Indian States, Deputy Managing Director of IMF said

THE ambitious Goods and Services Tax to be implemented from July 1 would help raise India’s medium-term growth to above eight per cent,the IMF has said,but expressed concern over the health ofthe country’s banking system. Observing that India is the “fastest growing emerging market economy” in the region, Tao Zhang, Deputy Managing Director of the International Monetary Fund, said the IMF believes that India will continue to grow at a fast pace, with a projected 6.8 per cent rate for FinancialYear2016-17and7.2per cent in 2017-18.

“The Government has made significant progress on important economic reforms that will support strong and sustainable growth going forward,” Zhang told PTI in an interview. “We expect that the Goods and Services Tax (GST), which is targeted to beapplied starting in July, will help raise India’s mediumterm growth to above 8 per cent, asitwillenhanceproductionand the movement of good sand services across Indian states,”he said.

Zhang said the IMF is“extremely impressed” by the work that is beingdone.“We expect it will pay off in terms of higher growth in the future,” he said in response to a questionon there forms being undertaken by the Indian Government. Lower global oil prices have boosted economic activity, and helped lower inflation.  

In addition,fiscal and monetary policies have helped foster economic stability, he said. “The currency exchange initiative led to a slowdown in economic activity. However, there are initial signsofrecovery as the currency exchange has been progressing well,” Zhang, who assumed the role of Deputy Managing Director at the IMF in August last year, said on demonetisation.

Zhang, who worked at the World Bank from 1995 to 1997 and at the Asian Development Bank from 1997 to 2004, said a key concern for the IMF in India is the health of the banking system which is still dealing with a large amount of “bad loans” as well as “heightened corporate vulnerabilities”inseveralkey sectors of the economy. In India, bad loans of public banks rose by over Rs1lakh crore to Rs6.06 lakh crore during April December of 2016-17, the bulk of which came from power, steel, road infrastructure and textiles sectors.The gross bad loans stood at Rs 5,02,068 crore at the end of 2015-16.