Liberalisation & structural reforms could help deepen integration in global value chains: IMF

Washington: Further liberalisation aided by structural reforms could help deepen India's integration in global value chains and its post-pandemic recovery, the International Monetary Fund (IMF) said on Monday.

Alfred Schipke, Director, IMF-STI Regional Training Institute and former International Monetary Fund India Mission Chief said that despite the COVID-19 pandemic, India has attracted the highest amount of Foreign Direct Investment (FDI).

Further efforts toward investment liberalisation aided by structural reforms could help deepen India's integration in global value chains and its post-pandemic recovery, Schipke said.

In recent years, policies to further liberalise FDI in agriculture, defence, telecommunications services and the insurance sector have helped India to attract Foreign Direct Investment, which has also improved the current account financing mix and helped contain external vulnerabilities, the official said.

Going forward, further progress could be made on the FDI liberalisation such as in the biotechnology, defence, digital media and pharmaceutical sectors, he said.

These efforts should be supported by structural reforms, including land reforms, labor reforms and reforms to reduce informality, and complemented by reforms to strengthen governance, the regulatory framework, and the rule of law, he noted.

Schipke said that structural reforms should be complemented by reforms to strengthen governance, the regulatory framework, and the rule of law to foster transparency and safeguard public accountability.

Further efforts towards trade and investment liberalisation could help deepen integration in global value chains. These include lowering tariffs (customs duties) on intermediate goods which would strengthen backward linkages and lift the competitiveness of exports such as autos, chemicals, electronics, and industrial machinery.

The domestic production-linked incentive schemes and privatisation of enterprises in non-strategic sectors may also support greater Foreign Direct Investment, he said.