Focusing on reforms, the reactivation of investments will return the Indian economy to expansion mode: DBS
SINGAPORE: For the Indian economy to return to its potential growth rate , the government has to focus on the timely deployment of reforms and reliving investments while taking proactive efforts to protect against increasing external risks , says a DBS report.
According to DBS, India currently enjoys an ideal combination of political stability, a credible central bank, a focus on reform and catalysts for growth to recover.
We believe that time is 'ripe' for growth to come out of the current slowdown and return to its potential rate in the next two or three years, said Radhika Rao, an economist at DBS Group Research.
According to DBS, timely rollout of 'R'eforms, jumpstarting 'I'nvestments and 'P'roactive efforts to guard against increasing external risks will return the economy to a healthy and steady 'E'xpansion mode.
Regarding reforms DBS said, rather that rollout of another bunch of fresh reforms , there is value in ensuring efficient and effective implementation of the already announced measures.
"Even in the absence of fresh 'big bang' reforms , smoother execution and implementation of already rolled out reforms will benefit the economy," it said and cited examples of already announced reforms like Goods and Services Tax (GST) and Insolvency and Bankruptcy Code (IBC).
Another key focus area should be to reactivate the investment climate, which has moderated over the past five to six years, Rao said.
Besides the domestic agenda, authorities will be required to take proactive efforts to guard against increasing external risks .
Throughout the first half of 2019 there were multiple headwinds, led by a growing protectionist tide in the economies as the trade dispute between the United States and China increased, moderating in the growth of the G7, slow global trade, uncertainty led by Brexit, volatile oil prices and China's slowdown. the report said.
The advances in the trade dispute between the United States and China and other protectionist policies present a challenge and an opportunity for India, he added.
According to Rao, he will return faster. expansion mode for the Indian economy is on the cards.
Macroeconomic vulnerabilities in India have improved considerably compared to the 2013 tantrum and better than in 2018. The current account deficit is set to remain below 3 percent of GDP for the seventh consecutive year in 2019, the report said. .
The structural need to increase potential growth to meet the growing employment needs of the economy, a higher rate of savings and, in turn, boost investment capacity through national resources, must remain a priority.
Hence as highlighted in this report, the combination of effective reforms and improved productivity, are crucial ingredients for the economy to return to potential growth and accelerate further, the report added.