India continued with privatisation and labour reforms despite Covid-19: IMF

Despite the pandemic, The International Monetary Fund (IMF) said that India continued with labour reforms and privatisation, while describing the country’s response to the Covid-19 situation as swift and substantial. However, the institution based on consultations among members in its report, sounded a caution note that the economic outlook remains clouded, owing to the pandemic-related uncertainties, contributing to both upside and downside risks.

In its consultations report, Article IV further said that a persistent negative impact of Covid-19 on investment and other growth drivers could prolong the economic recovery.

Headline inflation projected at 5.6% in 2021-22

It also appreciated the Indian government’s handling of the pandemic, has included fiscal support, including scaled-up support to vulnerable groups, monetary policy easing, liquidity provision, and accommodative financial sector and regulatory policies.

The multilateral agency has projected India’s economic growth at 9.5% in FY 2021-22, and 8.5% in 2022-23. Amid elevated price pressures, the headline inflation is projected at 5.6% in 2021-22.

IMF further said that, while India benefits from favourable demographics, disruption to access to training and education, due to the pandemic could weigh on improvements in human capital.

The recovery at the same time could be faster than expected, it said and added that increased pace of the vaccination and better therapeutics could help contain the spread and limit the impact of the pandemic.

The agency also noted that successful implementaion of the wide ranging structural reforms could increase India’s growth potential.