On Sunday, IMF’s Chief Economist Maurice Obstfeld praises BJP government and claims that India’s growth has been “very solid” since the last four years. He further praises the country’s fundamental economic reforms like GST and the Insolvency and Bankruptcy Code that is being carried out by the BJP-led Modi government.
66-years old Maurice Obstfeld is likely to retire from his post by the end of this month. Mr. Obstfeld will be succeeded by Gita Gopinath, who is the second Indian to be appointed to such position. Earlier. ex-RBI Governor Raghuram Rajan had served the International Monetary Fund as the Chief Economist.
Mr. Obstfeld told the source that “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.”
Summing up his impression in India’s economy over the last four-and-half years of the Modi government, Mr. Obstfeld said that India’s “growth performance has been very solid.”
He continued, “I mean, not so much in the third quarter of this year, but generally, it has been quite solid.”
“There are important vulnerabilities, so it is important for the reform momentum to be maintained even as an election comes up and for the path of fiscal adjustment to be maintained,” added IMF’s Chief Economist.
He further talks about one risk that has become much more evident since last few years is non-bank finance, which is termed as ‘shadow banking’.
Maurice Obstfeld also said that “There is a big challenge of stricter, oversight.”
Citing that there has long been a legacy of corporate debt, which is associated with poor infrastructural projects in India, he said that it has 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,” added Mr. Obstfeld.
However, with a forthcoming election in the country, there is a hesitation to do anything that is likely to slow the economy, said Mr. Obstfeld after observing, “But the lesson of experiences is that financial vulnerabilities can go south very quickly.”
The IMF’s Chief Economist has also served in the position for more than 3-years, will once again return to the Economic Department at the University of California, Berkeley.