IMF’s Chief Economist Maurice Obstfeld said that India’s growth has been ‘very solid’ over the past four years. He also praised the fundamental economic reforms like the GST and the Insolvency and Bankruptcy Code carried out by the government.
“India under the government of Prime Minister Narendra Modi has carried out some really fundamental reforms. These include the Goods and Services Tax (GST), the Insolvency and Bankruptcy Code…A lot of what they have done on financial inclusion has been really important,” news agency PTI quoted Obstfeld.
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Summing up his impression of India’s economy in the last four-and-a-half years of the Modi government, the top IMF economist on Sunday said the country’s ‘growth performance has been very solid.
“I mean, not so much in the third quarter of this year, but generally it has been quite solid,” he said. Maurice Obstfeld, 66 is set to retire this month and will be succeeded by Gita Gopinath, the second Indian to be appointed to the position. Former RBI Governor Raghuram Rajan had earlier served as Chief Economist of the International Monetary Fund.
“There are important vulnerabilities, so it is important for the reform momentum to be maintained even as an election comes up and for the path of fiscal adjustment to be maintained,” he added according to the PTI report.
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He said one risk that has become much more evident in the last few years has been non-bank finance, usually called shadow banking.
“There is a big challenge of stricter, oversight,” the economist said.
However, with an upcoming election in the country, there is a reluctance to do anything that would slow the economy, Obstfeld said, observing, ‘But the lesson of experiences is that financial vulnerabilities can go south very quickly.’
It is important for the Indian government to heed the RBI’s message on financial stability, he said adding that he does not want politicians ‘manipulating’ central banks for political ends.
“There is debate over whether it’s better for financial stability to be the remit of the central bank or an independent regulator…the UK in 1997, split them, then put them back together again. I’m not going to take a position on that…But I think…the central bank does have to be intimately concerned with financial stability to some degree and with the payment system,” he said, responding to a specific question on the recent developments in India regarding the RBI and the government.