Washington: The series of recent steps taken by New Delhi, including putting pending projects on fast track, liberalising foreign direct investment, and fiscal consolidation, will help India realise its potential growth rate, a top official of International Monetary Fund has said.
"Overall, there has been reform in accelerating policy approvals, project approvals, liberalising FDI, and continuing with the commitment for fiscal consolidation.
"The government is acting on a number of areas. That is why we do believe that potential growth in India could certainly go above where it currently has been," said Anoop Singh, Director of the Asia and Pacific Department, IMF.
From a high over 9 percent GDP growth for many years prior to the 2008 crisis, the economy grew 6.5 percent in 2011-12. The GDP growth figure for FY'13 is expected to be at decade low of around 5 percent due to global slowdown.
Responding to reporters' questions at a news conference, Singh said the IMF believes that India has the potential of a higher growth rate than it is now.
"We have seen, however, a drop in growth in recent years, but we are seeing in recent months a changing sentiment responding to changing policies," he said.
"If you look at some high frequency indicators, you will see that a recovery from the low growth in India is beginning.
"As you know, we are projecting for this fiscal year growth rising to about 5.8 (percent). If you look at the calendar year for 2014, we are seeing it already rising to over 6, around 6 percent," Singh said at the IMF news conference on Friday.
"On policies, one concern has been the slow rate of project approvals in India. Therefore, I think it is significant that the government has established a Cabinet Committee to accelerate project approvals and deal with this overhang of project requests that have not been approved," he said.
"On the other hand, and it is not just India but across Asia, capital is coming in. If you look at India, you will see that the balance of foreign direct investment to other capital has somewhat changed in recent years," Singh said.
"The ratio of FDI has gone down a bit. Therefore, it is important for India and other countries that the balance goes back and rises for FDI that is more sustainable. The challenge is to ensure it goes into sectors that are important for growth," he added.
"It is in that context that we should look very carefully at what countries are doing in Asia, and recently in India, to improve the attractiveness of FDI and enhance its FDI framework. They have liberalised the FDI regime in a number of areas, including in retail and aviation," Singh said.
First Published: Sunday, April 21, 2013, 18:24