MUMBAI – India will remain one of the world’s fastest-growing majoreconomies in coming years, the International Monetary Fund said Wednesday,in welcome news for Prime Minister Narendra Modi before elections next year.

In a wide-ranging report on Asia’s third-biggest economy, the IMF commendedgovernment economic reforms but called for action to contain inflation andincrease the number of women in the workforce.

The Washington-based institution forecast GDP growth for the 2018-2019fiscal year at 7.3 percent, rising to 7.5 percent the following year.

The pickup follows a fall to 6.7 percent growth in 2017-2018.

The IMF said India was facing a “broadly positive outlook” thanks to”strengthening investment and robust private consumption” but warned ofrisks from higher fuel prices and a weakening rupee.

Growth expanded to 7.7 percent for the quarter from January to March, thehighest for seven quarters, as the economy started to recover from a rockystart to Modi’s economic initiatives.

Despite teething problems, the IMF commended Modi’s government forintroducing a nationwide goods and services tax (GST) in 2017, whichreplaced a myriad of state and national taxes.

But it added that GST, which sets different value-added taxes for differenttypes of goods, could be improved.

“GST has a complex structure with a relatively high number of rates (andexemptions), which could be simplified,” it said.

India’s quarterly growth fell as low as 5.7 percent in mid-2017 as theeconomy readied for GST and reeled from a shock cash ban in late 2016. Thedecision to scrap 86 percent of currency notes, known as “demonetisation”,in November 2016 dealt a major blow to the economy.

The IMF noted that the move had caused “an acute monetary shock” but saidthe economy has since recovered.——————————

*Rising inflation*——————————

It praised the government for taking measures to tackle crippling debts atIndia’s public-sector banks and for relaxing rules on foreign directinvestment, but said more reforms were still needed.

“India would benefit from further liberalisation of trade and foreigninvestment,” the IMF said.

It also said India could boost growth further by bringing more women intoformal employment. Women are massively underrepresented in workplacesacross patriarchal India.

The IMF said its directors stressed “the importance of modernising labourlaws and regulations and other measures to help increase formal employment,particularly the employment of women”.

Inflation is on the rise due to high oil prices and a falling rupee.

The country, which is expected to hold a general election in spring 2019,imports nearly 80 percent of its oil and fluctuations in crude oil pricescan seriously affect the economy.

The IMF said it projects inflation to rise to 5.2 percent this financialyear, well above the target of 4 percent set by India’s central bank and a17-year-long low of 3.6 during the last fiscal year.

The Reserve Bank of India (RBI) has raised interest rates twice this summerand the IMF said it “will need to gradually tighten policy further, inresponse to inflation pressures”.

The IMF predicted that India’s current account deficit would widen to 2.6percent. It also warned of instability caused by a trade war between theUnited States and China.

IMF directors “underscored that risks to near-term growth persist, mainlyarising from volatile oil prices and tightening global financialconditions,” the report said. – APP/AFP