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‘GST to boost India’s strong growth’

Goods and services tax will provide a further boost when it is rolled out, the IMF also said

Policy Pulse
Publish Date: Sep 2 2016 5:55PM | Updated Date: Sep 2 2016 5:55PM

‘GST to boost India’s strong growth’

Ahead of the G20 meet in China, the International Monetary Fund (IMF) has said that Indian economy is likely to continue to grow strongly besides crediting its latest assessment to support from private consumption and saying that the goods and services tax will provide a further boost when it is rolled out. 


"In India, high-frequency data suggest continuing strong growth, underpinned by private consumption," the IMF said in a surveillance note released on Thursday, capturing 'Global prospects and policy challenges'. 


The 11th G20 Summit will be held on September 4-5 in Hangzhou in east China. The assessment comes a day after India reported a muted 7.1% growth in the first quarter of 2016-17, down from 7.9% in the previous quarter and the slowest in five quarters. The recent data has been more encouraging, with the manufacturing Purchasing Managers' Index or PMI soaring to a 13-month high. 


The IMF said the GST will provide a boost to the economy. "India has recently taken important steps toward a national goods and services tax which, when fully implemented, promises to boost tax buoyancy and growth, including by enhancing the efficiency of the internal goods and services market," the note said. The IMF also welcomed India's decision to shift to an inflation targeting framework. 


The government is setting up a monetary policy committee that will set interest rates, with a target of 4% and a margin of 2% on either side. "The recent formal adoption of a symmetrical inflation target by India should provide a robust institutional foundation for maintaining price stability," the IMF added.