India’s 7.5% growth may be overstated: US

The Dollar Business Bureau

Underscoring India’s 7.5% growth rate as “overstated”, US on Tuesday said the Narendra Modi-led government has been "slow" to match its economic reforms rhetoric.

US State Department’s report, however, praised measures taken by India in areas such as bureaucracy and easing FDI restrictions.

Highlighting that many of the government’s proposed reforms have been stuck in the Parliament, the report said it has resulted in many foreign investors showing reluctance from their once confident support to the BJP-led government.

The government failed to muster sufficient support from the opposition parties on key reform bills such as the land acquisition bill which doesn’t seem to get cleared in the near future. The Goods and Service Tax is another one on the list which, once implemented, could streamline India's tax structure and give an immediate boost to GDP.

"Ostensibly, India is one of the fastest growing countries in the world, but this depressed investor sentiment suggests that the approximately 7.5% growth rate may be overstated,” said the report published by the Bureau of Economic and Business Affairs.

Striking out the key structural impediments such as infrastructure bottlenecks, localisation requirements, massive shortages of electricity, poor regulatory environment, restrictions in many services sectors and tax and policy uncertainty, the report said these acted as major hindrances to India’s economic growth, and the government has done little to fix these.

The report also recognised India’s massive gains due to lower oil prices and said it may not be repeated in the current economic environment.

India’s economy is still restrained by a complex bureaucratic system and conflicting rules. “India has a decentralised federal system of government in which states possess extensive regulatory powers. Regulatory decisions governing important issues such as zoning, land-use, and environment vary between states. Opposition from labor unions and political constituencies slows the pace of land acquisition, environmental clearances, and investment policy," it said.