Indian economy remains a bright spot in global landscape: IMF official

Washington: Despite temporary setback due to demonetisation, India economy will grow strongly and remain a bright spot in the global landscape said a senior IMF official.

In its annual country report on India, the International Monetary Fund (IMF) on Wednesday said growth is expected at 6.6 per cent in this fiscal year and at 7.2 per cent in the following year.

"The Indian economy is growing strongly and remains a bright spot in the global landscape," the IMF mission chief for India, Paul Cashin said.

Cashin said the halving of global oil prices that began in late 2014 boosted economic activity in India, further improved the external current account and fiscal positions, and helped lower inflation.

In addition, continued fiscal consolidation, by reducing government deficits and debt accumulation, and an anti-inflationary monetary policy stance have helped cement macroeconomic stability, he added.

Noting that the government has made significant progress on important economic reforms, which will support strong and sustainable growth going forward, Cashin said the upcoming implementation of the goods and services tax (GST) will help raise India's medium-term growth to above 8 per cent.

GST will enhance the efficiency of production and movement of goods and services across Indian states, he said.

However, there is little scope for complacency.

"A key concern for us is the health of the banking system, which is still dealing with a large amount of bad loans, and also heightened corporate vulnerabilities in several key sectors of the economy," he said.

Responding to a question on demonetisation, he said the strong shortage of cash has disrupted economic activities.

With PTI Inputs