India needs more economic reforms to ensure growth, attract investment: IMF

Concerted efforts by India to strengthen the business climate and encourage investment in the trade have helped to attract investment, but the country needs further economic reforms to ensure sustainable and more inclusive growth, the IMF said on Thursday.

The remarks by the International Monetary Fund's Chief Spokesperson Gerry Rice came in response to a question on the recent FDI announcements made by companies like Facebook and Google in India.

In recent weeks, several international companies have pledged $20 billion FDI in India, and a whopping $40 billion this year so far.

Concerted efforts have been made in recent years, in India, to strengthen the business climate and encourage investment in trade, and these have helped to attract investment and improve the current account financing mix and also help to contain external vulnerabilities, Rice told reporters at a news conference here.

Relevant reforms have included the new bankruptcy code, the National Goods and Services Tax. These have helped to gain in India's doing business ranking, moving up rapidly in the World Bank's Ease of Doing Business index, up to 63 in 2020, from 100 in 2018, significant progress there, indeed, Rice said.

And, nonetheless, further economic reforms, including labour, product mixed land, and others, and additional infrastructure investment are necessary, in our view, to attract even more investment, and to ensure sustainable and more inclusive growth in India, he said in response to the question.

Recently, the IMF in its update to the World Economic Outlook projected India's growth rate at -4.5 per cent, and then six per cent recovery, for the fiscal year 2020-21 and fiscal year 2020-22, respectively, he said.

Our projection for fiscal year '20-2021 was revised down, as was the case for most countries driven by the impact of the pandemic, Rice added.

On balance, I think we would say the risks to the economic outlook remain," he said.

Despite gradual recovery in activities and a solid agricultural performance, the downside risks remain.

"The main downside risk is, of course, the continued spread of the pandemic," he noted, referring to the coronavirus pandemic.

"Further outbreaks could require additional lockdowns, and concerns about the virus could also dampen consumer confidence and delay the economic recovery. Again, this is the case not just in India, but in many countries, Rice said.