Washington: India carried out key structural reforms at the right time – when the growth rate was high – and it will serve the country well in the days to come, Finance Minister Arun Jaitley said on Sunday.
Some of the key reforms, including demonetisation and the GST, were carried out keeping in mind their long-term benefits to the country's economy and as a result India's growth rate is now headed for a higher trajectory, he said.
"When the world was growing at two-and-a-half per cent, India was the fastest-growing major economy in the world. That was a time to really fix the roof. You don't have to wait for a downward slide in order to do it," Jaitley told a group of Indian reporters at a news conference here.
"I think, this was just the right time to bring about structural changes," he said.
The finance minister took a shot at his critics who claim that demonetisation has hurt the Indian economy – at least in the short-run.
"The fundamental question is: Does India continue to indefinitely be a cash dominated economy? To say it's a very risky proposition, it will have adverse consequences for a quarter or two, so let's not attempt it? Can India say, you will have de-stocking, so let s not attempt a GST?," the finance minister asked. Among his critics were several leaders from the opposition Congress party; Jaitley said the BJP simply did what the Congress couldn't while they were in power.
"Attacking or ending this black money was never a priority for the Congress. So their concern (about demonetisation) is natural. And GST was a Congress move. But since (the Congress) party is an opportunist party, it is opposing it," he said.
"Populism is what we did not indulge in. We could have let people live in a cash dominated economy and let India continue to have a shadow economy and have everyone really prosper on that basis. (But) we struck a blow to that kind of an economy. That's not populism. That was the right economic policy to follow," he said.
The Indian government has, however, received support from top leaders of the IMF and the World Bank who have called the slowness in recent Indian growth rate "an aberration" and a short-term one. Jaitley said the positive responses and statements about the Indian economy by the world leaders had "increased the confidence of India".
"There is a global appreciation of the fact that India has the capacity and courage to carry out structural reforms like demonetisation and GST," he said. Jaitley said the upgraded global growth projections should be a further help to India's own growth rate.
"Now that you have the global economy also improving, and that's the mood that I've seen at the IMF-Bank this time – the IMF s own projection for the world economy this year is 3.6 per cent and next years is 3.7 per cent – the global tailwinds will also give better impetus to domestic growth," said Jaitley.
"I think, we should be looking forward to a much higher growth trajectory (for India) in the days to come," he said.
India calls for urgent revision of IMF quota
Washington: India has called for urgent revision of the quota of International Monetary Fund in favour of dynamic emerging market so as to reflect the ground realties of the world.
Addressing the annual meetings of the IMF and the World Bank here, Finance Minister Arun Jaitley hoped that this can be accomplished as part of the 15th General Review of Quotas.
"There is an urgent case for revising quota shares in favour of dynamic emerging market countries in line with global economic realities to maintain fairness in the governance structure of the Fund," he told the world financial leaders on Saturday.
"We should make every effort to complete the 15th Review by the agreed timeline of 2019 Annual Meetings," he asserted. Jaitley said the risks to global financial and economic stability have significant implications for IMF's operations.
He said the IMF needs to be adequately resourced to meet these demands while functioning as a strong quota-based institution.
Similarly, for the World Bank Group, a delayed but unanimously agreed Lima Roadmap had envisaged to see a conclusion of the 2015 shareholding review by Annual Meetings 2017, he said.
"While we note that we failed to deliver it, given the progress that has been made so far, we strongly urge all to commit to deliver an equitable conclusion of this process for both the IBRD and IFC by the Spring Meetings 2018," he said.
He warned that any further delay in concluding the review will risk not only development in the client countries but the existence and leadership of both Bank and IFC in MDBs.
Indian economy on 'very solid track': IMF chief Lagarde
Washington: IMF chief Christine Lagarde has said the Indian economy is on a "very solid track" in the mid-term, days after the International Monetary Fund lowered its growth forecast for the current and the next year.
Describing the two major recent reforms in India - demonetisation and Goods and Services Tax (GST) - as a monumental effort, Lagarde said it is hardly surprising that there "is a little bit of a short-term slowdown" as a result. The IMF last week lowered India's growth projection to 6.7 per cent in 2017, 0.5 percentage points less than its previous two forecasts in April and July, attributing it to demonetisation and introduction of the GST. It also lowered the country's growth for 2018 to 7.4 per cent, 0.3 percentage points less than its previous two projections in July and April. India's growth rate in 2016 was 7.1 per cent, which saw an upward revision of 0.3 percentage points from its April report.
"Turning to India...we have slightly downgraded India; but we believe that India is for the medium and long-term on a growth track that is much more solid as a result of the structural reforms that have been conducted in India in the last couple of years," IMF Managing Director Lagarde said.
"But for the medium term, we see a very solid track ahead for the Indian economy," she said to a question on India.
"We very much hope that the combination of fiscal, because the deficit has been reduced, inflation has been down significantly, and the structural reforms will actually deliver the jobs that the Indian population, particularly the young Indian people expect in the future," Lagarde said.