The recent slowdown in India’s economic growth is an “aberration” mainly due to the temporary disruptions caused by the introduction of the goods and services tax (GST), and these will get corrected as the government streamlines implementation of the new indirect tax regime in the next few months, the World Bank said on Thursday.
World Bank President Jim Yong Kim also said that the Goods and Services Tax (GST) is going to have a hugely positive impact on the Indian economy, even as he insisted that the slowdown is temporary.
“We think that the recent slowdown is an aberration which will correct in the coming months, and the GDP growth will stabilise during the year. We’ve been watching carefully, as Prime Minister (Narendra) Modi has really worked on improving the business environment, and so, we think all of those efforts will pay off as well,” Kim said.
“There’s been a deceleration in the first quarter, but we think that’s mostly due to temporary disruptions in preparation for the GST, which by the way is going to have a hugely positive impact on the economy,” Kim told a group of reporters during a conference call ahead of the annual meeting of the International Monetary Fund and the World Bank.
Kim’s comments come ahead of the annual IMF-World Bank meeting next week.
The World Bank and the IMF are also expected to come out with their new GDP figures and growth projections for India and the rest of the world next week.
Finance minister Arun Jaitley would be leading the Indian delegation to the Fund-Bank annual meeting.
India’s GDP grew 5.7 per cent during the April-June period against a 6.1 per cent growth during the previous quarter (January-March).
The GDP growth rate for the same quarter last year was 7.9 per cent.
Ahead of the annual meeting, Kim said after years of disappointing growth, the global economy has begun to accelerate, and trade is picking up as well, but investment remains weak.
“We are concerned that downside risks such as a rise in protectionism, policy uncertainty, or possible financial market turbulence could derail this fragile recovery,” he said.
“Countries need to continue to advance their reform agenda, they need to invest in people. They need to build resilience against overlapping challenges, including the effects of climate change, natural disasters, as well as conflict, forced displacement, famine and disease.”
“Let me just say, as I said from the beginning. I’m not sure that I could say that any country in the world is investing enough in their human beings. I think there’s no country in the world that can’t improve its healthcare system. There’s no country in the world that can’t improve its educational system,” Kim said.
Responding to a question on India and human capital, Kim said Prime Minister Modi has made a huge commitment to sanitation issues, and ‘Swachh Bharat’ is one of the “most effective programmes” anywhere.
“I know that Prime Minister Modi himself personally is very committed to improving opportunities for all of India. But, India has a lot of challenges. We look at some of the educational outcomes, we’ve looked at some of the health outcomes, and India has room to improve, like most other countries,” he said.
“Our job is to take the political will and commitment that Prime Minister Modi has clearly demonstrated and has communicated to everyone, and then bring to India the most effective intervention that will, as quickly as possible, improve the stock of human capital,” Kim said.
That’s the message for every country in the world, he said.