Washington: The International Monetary Fund has said India needs to address ‘bottlenecks’ in its power and infrastructure sectors which are mainly to be blamed for a dramatic slowdown in the country’s economic growth over the past year or so.
Thomas Richardson, senior resident representative for the IMF in India told The Wall Street Journal that the main reasons for slow growth in India are structural in nature more than lack of finances.
He said that things like getting projects approved and cleared and implemented seem to have slowed down.
India’s economic growth is at its weakest in a decade following weak demand for its exports in developed markets and slow investments. The developing nation also faces challenges of high inflation and wide fiscal and current account deficits.
According to the report, lack of clear-cut policies on land acquisition and a multiplicity of authorities and bureaucratic hurdles often lead to delays in the implementation of industrial and infrastructure projects in India, creating an obstacle to economic growth.
Richardson said that If India was able to address the structural challenges it should start to gradually turn around.
He added that the Cabinet Committee on Investment, which was recently set up to speed up big ticket industrial and infrastructure projects, was a good first step.
He added that he backs the Reserve Bank of India's focus on reducing inflation, rather than lowering key lending rates to spur growth.
According to the report, inflation in India has been hovering at uncomfortably high levels for well over three years.
Although wholesale inflation, the benchmark for India, has eased in the past few months, consumer price inflation is still in double digits.
Senior IMF economist James Walsh lauded India’s moves to stick to a fiscal consolidation roadmap which envisages the budget deficit getting cut to 4.8 percent of GDP next fiscal year, from an expected 5.2 percent this year, and gradually to three percent by March 2017, the report said.
He however added that the government would need to control expenses, especially on subsidies such as diesel and fertilizers - mainly non-urea, and expand the tax base to generate more revenue to be able to meet fiscal objectives over the long run, it added.