India under Modi carried out some really fundamental reforms: IMF chief economist
The IMF chief backed key initiatives of the NDA government including Goods and Services Tax (GST) and Insolvency and Bankruptcy Code (IBC).
In Short
- IMF chief economist said India's growth story has been solid in the last four years
- He called for stricter norms to keep an eye on the ailing NBFC sector
- Obstfeld said there has been a long legacy of corporate debt associated with bad infrastructure projects in the country
Outgoing IMF Chief Economist Maurice Obstfeld on Sunday praised Prime Minister Narendra Modi’s government for steering solid economic growth in the country.
He backed key initiatives of the NDA government including Goods and Services Tax (GST) and Insolvency and Bankruptcy Code (IBC).
The outgoing 66-year-old IMF chief economist, who is set to retire at the end of this month, will be succeeded by Gita Gopinath the second Indian to be appointed to the position. Former RBI Governor Raghuram Rajan had served as Chief Economist of the International Monetary Fund.
"India under the government of Prime Minister Narendra Modi has carried out some really fundamental reforms. These include the Goods and Services Tax (GST), the Insolvency and Bankruptcy Code. A lot of what they have done on financial inclusion has been really important," Obstfeld said.
Growth performance solid under NDA
Commenting on India’s growth over the past four-and-a-half years under the present NDA government, Obsfeld said, The country’s growth performance has been very solid.
"I mean, not so much in the third quarter of this year, but generally it has been quite solid," he said.
"There are important vulnerabilities, so it is important for the reform momentum to be maintained even as an election comes up and for the path of fiscal adjustment to be maintained," Obstfeld added.
He highlighted the recent crisis in the country's non-banking finance corporations or NBFCs or the shadow banking’ industry and called for stricter norms and oversight.
"There is a big challenge of stricter, oversight," the economist said.
Obstfeld said there has been a long legacy of corporate debt associated with bad infrastructure projects in the country, adding that such loans have been very concentrated in the banking system.
"But as the government is trying to better oversee the banking system, these loans have migrated to shadow banking and that is an area where more needs to be done to contain financial pressures, which we are beginning to see in India," he said.
Citing the upcoming general elections in India next year, he said the government is putting up its best effort to keep up the growth momentum but added that each step should be equated as financial vulnerabilities can go south very quickly.
Obstfeld, who served as chief economist at IMF for more than three years, will return to the Department of Economics at the University of California, Berkeley.
(With inputs from PTI)