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Maintain Reform Momentum To Reverse Economic Slowdown: World Bank
The India Development Update released today is a biannual flagship publication of the World Bank that takes stock of the Indian economy.
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India needs to continue implementing critical reforms in key areas like health, labour, land, skills and finance to come out stronger from the impact of Covid-19 pandemic, the World Bank said on Wednesday.
These reforms should aim at enhancing productivity of the Indian economy and spur private investments and exports.
The India Development Update released today is a biannual flagship publication of the World Bank that takes stock of the Indian economy. The current issue describes the state of the Indian economy over the previous six months and places these in a longer-term and global context.
It also provides a more in-depth analysis of selected economic and policy issues and highlights the economic reforms that India has been undertaking and needs to continue with in the medium to long-term.
"While the government with support of the Reserve Bank is continuing to take action to limit the impact of Covid-19 pandemic, there is a recognition of both the uncertainty of the nature of the economic revival globally and the emergence of opportunities opened by the current crisis," said Junaid Ahmad, World Bank Country Director in India.
"Countries that invest in sectoral reforms -- infrastructure, labour, land and human capital -- and ensure that their national systems are connected to global value chains are more able to respond to uncertainties and are better placed to take advantage of any global shifts. Investing in these areas will give India the ability to navigate these uncertainties and be more competitive as the world emerges from the pandemic."
The report says furthering such reforms will help put the economy back on a 7 per cent growth path.
To instill fiscal discipline in handling Covid-19 related implications, the report suggests India may reassess subsidies to leverage any scope for efficiency gains, evaluate how much can be borrowed domestically and externally, generate non-tax revenues more aggressively and link the repayment of new borrowings to disinvestment receipts.
To put the financial sector on a sounder footing, the report identifies specific areas of reform: financial sector stability, reforms in the non-banking finance company (NBFC) sector, deeper capital market reforms, mainstreaming fintech to reach firms faster and at a lower cost, and moving to a more strategic public-sector footprint.
"The recent liquidity and performance issues in the financial sector, exacerbated by the Covid-19 crisis, present policymakers with a strong reason -- and an opportunity -- to accelerate efforts towards building a more efficient, stable and market-oriented financial system, said Lead Economist Poonam Gupta and Senior Economist Dhruv Sharma.
"It is encouraging that the government is moving to a more selective and strategic public sector footprint in the financial sector. International experience shows this can boost the banking sector's ability to support credit, facilitate effective financial intermediation and reduce fiscal exposure."
The current crisis has also brought to the forefront new economic opportunities in the areas of digital technology, retail, health-technology and education-technology services besides global demand in areas such as pharmaceuticals, medical equipment, and protective gear. These opportunities can provide new growth levers for India, the report adds.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.