IMF Highlights India's Growth Potential Amid Calls for Structural Reforms

The International Monetary Fund (IMF) has recently underscored India's potential for sustained medium-term growth, attributing it to the country's strong financial sector health, robust corporate balance sheets, and advanced digital public infrastructure. However, the IMF also emphasized the necessity for India to implement crucial structural reforms to ensure this growth trajectory continues.

Key Areas for Reform

Among the priority areas identified by the IMF are the simplification of the Goods and Services Tax (GST) system, preferably moving to a single rate of 14%, reducing excise duty on fuel, and broadening the income tax base. The IMF also highlighted the importance of pursuing agricultural, land, governance, and judicial reforms, alongside strengthening education, skilling, public health, and social safety nets.

Challenges and Recommendations

The IMF pointed out that while the Production Linked Incentive (PLI) scheme has attracted significant foreign investment, it may not be sufficient to create the number of jobs needed to absorb the growing labor force. The fiscal costs per job created under this scheme are substantial, indicating the need for deeper reforms beyond PLIs. Additionally, the IMF suggested reviewing the bilateral investment treaty and exploring more trade deals beyond bilateral agreements to further stimulate economic growth.