Implying that India has not taken the required steps to turn into a manufacturing major, IMF Chief Economist Gita Gopinath on Friday said that the country needs a separate set of reforms to become a manufacturing and export hub.
Speaking at a FICCI event here, the International Monetary Fund’s (IMF) Chief Economist suggested that India reform its land acquisition and labor laws.
“To get manufacturing off the ground and for India to have a bigger presence on the export stage, that would require another set of very big reforms. There are important reforms that are needed concerning land acquisition, labor laws and it is hard to generate an ecosystem where you can end up with large scale manufacturing,” she said.
Gopinath also observed that India has not been able to utilize the opportunity to join the global supply chain during the change in international trade dynamics in recent times.
“India is missing out on what we are seeing globally in terms of a shift in global supply chains around the world, with all the developments we have seen over the last year. These (reforms) need to be undertaken, they are good for the economy more broadly,” she said.
Regarding regulatory issues in the country, Gopinath said that regulatory uncertainty in India is one of the reasons for the ongoing economic slowdown.
“I believe, in the slowdown, regulatory uncertainty has played a role. That’s another factor that needs to be addressed. It’s important for India to take up reforms but to be able to do this with greater clarity and greater certainty would help,” she said.
Regarding the Goods and Services Tax (GST) regime which is termed as India’s biggest tax reform, she said that more needs to be done to bring clarity and certainty regarding the regulations and tax rates.
“GST, which has been very important for formalizing the Indian economy, but again there… certainly more needs to be done on what the rules are, what the rates are going to be…”
On her recent announcement that the IMF may sharply revise India’s growth outlook for the current fiscal, she said that some high-frequency indicators do not show an increase in India’s growth in the third and fourth quarters as was anticipated earlier.
“We expected that the first two quarters of fiscal 2019-20 would be a slowing scenario and then there would be an uptick in the third and fourth quarter. Looking at some of the high-frequency indicators we are not seeing the kind of uptick we were projecting, so this is why I mentioned that we will be revising the numbers again in January.”