World Bank chief hails PM Modi's reforms; says GDP blip is transient

Amidst widespread criticism within the country from the opposition parties and from even within his own party BJP for the country's falling economic growth rate, Prime Minister Narendra Modi has found support from none other than World bank president Jim Yong Kim.

The World Bank chief on Thursday instead hailed PM Modi's economic reforms, calling them 'significant' and lauded the introduction of the goods and services tax, although he lamented the inordinate delay in implementing the new indirect tax regime.

Kim went on to highlight the importance of the reforms in the long run. "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," he said.

"The reform process has been significant," Kim told reporters at the beginning of the annual meeting of the International Monetary Fund (IMF) and the World Bank in Washington.

"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," added Kim.

Kim acknowledged the government's work while responding to a question hrom the Hindu Business line's Surabhi on the recent economic slowdown in India.

The questioner had sought Kim's reaffirmation of his optimism about the Indian economy at a time when GDP growth had fallen to levels around 5.7 per cent, private investments have fallen and the World Bank itself reduced India's growth forecast for 2017 and '18.

''I think that the point that I was making is that our team feels that the slowdown has been the result of waiting for the passage of the goods and services tax. But the goods and services tax, we have to understand, is something that India has been talking for a long time, well before Prime Minister Modi took power. 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 payment process. The goods and services tax will be very good for Indian growth, but for now, the sense is that companies are waiting until that passes before really making investments and taking action.  So, our sense is that this is temporary.

''Prime Minister Modi took a very different approach to our Doing Business report. His approach was: we are going to move up quickly and we're going to do the things that we need to do to reform the business environment. And the actions that he's taken are really quite substantial. So, we'll wait to see what happens on the Doing Business report this year, but we've been very encouraged with the reforms that he has already taken. Now he's know that there are more to do. I won't be specific about them because they have prioritised them for the government, but the reform process has been significant and 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'' Kim said.

While the Reserve Bank of India (RBI) has predicted 7.7 per cent growth in the coming quarters, both the World Bank and the IMF have downgraded India's growth projections.

On Wednesday, the World Bank stated that India's GDP may slow down from 8.6 per cent in 2015 to 7 per cent in 2017 because of disruptions by demonetisation and the GST, the IMF has forecast India's growth projection to be 6.7 per cent in 2017.