India on its way recovering from demonetization disruptions: IMF

Why in news

The Indian economy now seems to be on its way to recovering from disruptions caused by demonetization and roll-out of goods and services tax, the IMF said today. At the same time, the IMF has underscored the significance of reforms in other key sectors like education, health and improving the efficiency of the banking and financial systems.


  • India’s economy has expanded strongly in recent years, thanks to macroeconomic policies that emphasise stability and efforts to tackle supply-side bottlenecks and structural reforms. Disruptions from demonetisation and the rollout of the goods and services tax (GST) did slow growth,”
  • “However, with the economy expanding by 7.2 per cent in the latest quarter, India has regained the title of the fastest-growing major economy.
  • the Indian economy would benefit from further reforms, such as enhancing health and education, encouraging private and public investment, and improving the efficiency of the banking and financial system. This would support durable and inclusive growth and enable India to move toward the income levels of wealthier countries.
  • Given the dominance of cash in everyday transactions in the Indian economy it was inevitable that demonetisation would temporarily affect economic activity, said Zhang who is travelling to India and Bhutan from March 12 until March 20.

GST implementation

  • Goods and Services Tax (GST) is a comprehensive indirect tax on manufacture, sale, and consumption of goods and services throughout India. GST would replace respective taxes levied by the central and state governments.
  • The rollout of the GST last year was a landmark accomplishment that can be expected to enhance the efficiency of intra-Indian movement of goods and services, create a common national market, enhance tax buoyancy, and boost GDP growth and job creation,
  • Yet the complexities and glitches in GST implementation also resulted in short-term disruptions. As I mentioned earlier, the economy now seems to be on its way to recovering from those disruptions.
  • IMF research indicates that tariffs are broadly contractionary, reducing output, investment, and employment. Trade tariffs may give limited relief to industries and workers that directly compete with affected imports. However, they can raise costs to consumers and other businesses that use the protected products. Tariffs also would reduce incentives for businesses to compete and improve efficiency.
  • Since the opening of the economy starting in the early-1990s, India has benefitted from trade liberalisation, he observed. Further supply-side reforms aimed at improving the business climate could enhance these benefits, the top IMF official asserted.
  • The centre partners with India and its South Asian neighbors to build strong institutions and implement policies that promote growth and poverty reduction in the region.

Q.1 Which of the followings are correct with respect to Goods and Services Tax (GST)

  1. It is an indirect tax for the whole country on the lines of One Nation One Tax to make India a unified market.
  2. It is a single tax on supply of Goods and Services in its entire product cycle or life cycle.
  3. It is calculated only in the Value addition at any stage of a goods or services.
  4. The final consumer will pay only his part of the tax and not the entire supply chain which was the case earlier.

Choose the correct answer from the above statements

  1. 1 only
  2. 1 and 2 only
  3. 1, 2 and 4 only
  4. All of the above

Answer: d.) All of the above  

Print Friendly, PDF & Email
We will be happy to hear your thoughts

      Leave a reply

      This site uses Akismet to reduce spam. Learn how your comment data is processed.

      Current Affairs ONLY
      Register New Account
      Reset Password