International Monetary Fund’s (IMF) Chief Economist Maurice Obstfeld said on Sunday, December 9 that over the past four years, India has had a “very solid” growth. The fundamental economic reform that the government carried out, for instance, the Goods and Services Tax (GST) and the Insolvency and Bankruptcy Code, were appreciated by him. 

Obstfeld praises Modi government

“India under the government of Prime Minister Narendra Modi has carried out some really fundamental reforms. These include the Goods and Services Tax (GST), the Insolvency and Bankruptcy Code…A lot of what they have done on financial inclusion has been really important,” Obstfeld was quoted as saying. 

Talking about his impression of India’s growth during the span of the Narendra Modi government, Obstfeld had to say that the country’s “growth performance has been very solid”. He further said that since there are important vulnerabilities, the reform momentum must be maintained even during the coming up of an election and also to maintain the path of fiscal adjustment, said a report by The Indian Express.

Risk associated with banking system

One risk that he believes has become very evident in the last few years is shadow banking or non-bank finance. Making note of the fact that for a long time there has been a legacy of bad infrastructure projects associated with corporate debt, Obstfeld mentioned that it has mostly been very concentrated in the banking system.

“But as the government is trying to better oversee the banking system, these loans have migrated to shadow banking and that is an area where more needs to be done to contain financial pressures, which we are beginning to see in India,” he said.

Obstfeld noted that with an election coming up in the country, people are reluctant to do anything that might slow the economy. “But the lesson of experiences is that financial vulnerabilities can go south very quickly,” he observed.

66-year-old Obstfeld, who has been the Chief Economist for over three years now, will return to University of California’s Department of Economics. Following his retirement at the end of this month, he is going to be succeeded by Gita Gopinath, who will again be the second Indian to be appointed to this position. The International Monetary Fund had former RBI Governor Raghuram Rajan as Chief Economist.

Growth under Modi government

A report by Reuters said that in the three months through June 2018, India’s annual economic growth has leapt to a more than two-year high of 8.2%. This has given a political boost to the Modi government.

Data also showed expansion in manufacturing and consumer spending, raising hopes for a turnaround of the rural economy.

Beating a Reuters poll forecast of 7.6 per cent, the recent period’s annual pace was the highest since India logging 9.3% growth in the quarter of January-March in 2016. It very easily surpassed China’s 6.7% growth for the same quarter.

Also Read: Gita Gopinath Becomes The First Woman Chief Economist At IMF