New Delhi: International Monetary Fund (IMF) has projected 5.8% economic growth for India in fiscal 2013-14 and said pace of investment in infrastructure should increase to get back to 8% expansion level.
“We are forecasting India to grow at about 5.8% this fiscal and 6.3% in 2014-15. This compares to an average growth rate of 8.7% for the five years prior to the global financial crisis,” IMF deputy managing director Naoyuki Shinohara said during an event here on Wednesday.
There are possibly three reasons for the slowdown—the stagnant global economy, cyclical policies and structural domestic bottlenecks, Shinohara said.
Talking about structural bottlenecks, Shinohara said there is a need for infrastructure development in India. “As investment in new roads, factories, ports and energy has fallen, the speed limit of the Indian economy has come down too. Getting back to 8% growth will require addressing the investment problem, and that means getting companies investing again,” Shinohara added.
Project approvals have become more difficult, “perhaps because of the scandals related to big projects, increasingly complex and overlapping regulations and intensified scrutiny of all projects,” he said.
The slowdown in bureaucratic approvals is affecting road building, power plant construction and new factory approvals. Measures such as establishing the cabinet committee on investment can speed up project approvals but these approvals need to be accelerated, he said.
The new land acquisition Bill would help companies and government entities to obtain sufficient land for new investment projects, he added. “These structural reforms would all help bring growth back to pre-crisis level,” he added further. “While nominal interest rates are high, real rates are significantly lower because of India’s high inflation. On the fiscal side, the budget deficit has been falling, but slowly ... The growth slowdown is too big to be explained by fiscal consolidation and monetary tightening,” he said.