G20 note warns India on policy uncertainty

Stalling of investments, regulatory obstacles, infrastructure & labour market obstacles dragging down economic growth

After Prime Minister's Economic Advisory Council (PMEAC), a surveillance note by G-20 today cautioned India that its economic growth could be dragged down due to stalling of investment caused by policy uncertainty and regulatory obstacles, besides infrastructure and labour market obstacles.

"Where supply factors (infrastructure or labor market bottlenecks) and domestic policy factors (policy uncertainty and regulatory obstacles) have contributed to the recent stalling of investment (Brazil, India, and Russia) there are down side risks to growth potential," the note said.

Earlier this week, PMEAC had stated that stalled projects are holding capital and raising incremental capital output ratio that pulled down India's economic growth to a decade low of 5% in 2012-13.

India, along with several emerging EU economies and west Asian oil importers will face significant fiscal challenges in the coming years, the note, titled  “Global Prospects and Policy Challenges”, said.

The G-20 surveillance note said though public debt ratios in most emerging economies are lower than in advanced economies, it is possible that debt dynamics could become less benign.

The note said that though policy actions have reduced tail risks and financial conditions have improved, global activity is moving at three speeds---activity is low in some countries, it is improving in others and weak in other.