The reforms undertaken by Prime Minister Narendra Modi have been "significant" and the results would be reflected in the mid and long-term growth figures, the World Bank chief said today, days after the global lender forecast that India's GDP may slowdown to 7 per cent in 2017.
"The reform process has been significant. We think that certainly in the medium and long term, the growth will reflect the seriousness of Prime Minister Modi's government in making those reforms," Jim Yong Kim told reporters at the start of the annual meeting of the IMF the World Bank here.
Kim was responding to a question on recent slowdown of the Indian economy. Both the World Bank and the IMF have downgraded India's growth projections.
The World Bank yesterday forecast that India's GDP may slowdown from 8.6 per cent in 2015 to 7 per cent in 2017 because of disruptions by demonetisation and the GST.
The IMF has also lowered India's growth projection to 6.7 per cent in 2017, 0.5 percentage points less than its previous two forecasts and slower than China's 6.8 per cent.
Last week, the World Bank chief had said that the recent slowdown in India's economic growth is short-term and an "aberration" mainly due to the temporary disruptions in preparation for the GST.
“Our team feels that the slowdown has been because of the waiting for the passage of goods and services tax,” Kim said in response to a question on India’s growth slowdown.
“But the goods and services tax we have to understand is something that India has been talking about for a long time, well before Prime Minister Modi took power,” he said. The goods and services tax is going to stop things like trucks being stalled for such a long time in transporting things through India because at every border they have to stop and go through a complicated tax process, he explained.
“The goods and services tax would be very good for Indian growth, but for now the sense is that companies are waiting until that passes before really making investment and taking action. So, our sense is that this (slowdown in growth) is temporary,” said the World Bank president.
In his answer, Kim was very appreciative of the reforms being undertaken by Modi in the last three years. “Prime Minister Modi took a very different approach to our doing business report. And his approach was we are going to move up quickly and we are going to do the things that we need to do to reform the business environment,” he said.
The actions that Modi has taken are “really quite substantial”, he said. The ease of doing business report is slated to come out soon. “We’ll wait to see what happens on the business report this year but we’ve been very encouraged with the reforms that he has already taken. He knows that there are more to do,” he said. “I won’t be specific about them because they have to prioritize them for the government, Kim said when asked what steps India needs to take. But the reform process has been significant,” Kim said.