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‘India’s 7.5 per cent growth rate may be overstated’

July 06
03:36 2016

India''s 7.5 per cent growth rate may be overstatedWASHINGTON: India’s 7.5 per cent growth rate may be “overstated”, the US has said, underlining that the Narendra Modi government has been “slow” in proposing economic reforms in some areas to match its “rhetoric”.

Appreciating the series of economic reforms especially streamlining bureaucratic decision making and raising FDI limits in certain sectors, US State Department in a report, however, said the Modi government has been slow to propose other economic reforms that would match its rhetoric and many of the reforms it did propose have struggled to pass through Parliament.

This has resulted in many investors retreating slightly from their once forward-leaning support of the BJP-led government, said the report “Investment Climate Statements for 2016” released by the Bureau of Economic and Business Affairs yesterday.

“For example, the government failed to muster sufficient political support on a land acquisition bill in Parliament all but ending its chance of passage in the near term and is still negotiating with opposition parties the details of a Goods and Services Tax Bill, which if not watered down in negotiations, could streamline India’s convoluted tax structure and provide an immediate boost to GDP,” it said.

“Ostensibly, India is one of the fastest growing countries in the world, but this depressed investor sentiment suggests the approximately 7.5 per cent growth rate may be overstated,” the report said.

There are few quick fixes to the structural impediments, poor regulatory environment, tax and policy uncertainty, infrastructure bottlenecks, localization requirements, restrictions in many services sectors, and massive shortages of electricity that hinder India’s economic growth potential, it said.

Recognizing that the gains from a massive, positive terms-of-trade shock due to lower oil prices that India has benefited from may not be repeated in the current global economic environment, the Finance Ministry has slightly reduced the official growth outlook for next year, it said.–PTI



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