India better than many economies except for labour markets: Gopinath

NEW DELHI: Gita Gopinath, deputy managing director, IMF, has cautioned that India needs to work on labour markets and land, even as she hailed the country for doing better than many global economies.

In an interview on the sidelines of the ongoing World Economic Forum (WEF) meeting at Davos on Wednesday, Gopinath cautioned against growing fragmentation globally, saying it hurt the global growth rate.

The COVID-19 pandemic and the Russia-Ukraine war has made countries much more concerned about national security and economic security, which is causing them to undertake policies that could lead to greater fragmentation, she was quoted as saying in the interview.

India though, she said, has been receiving lots of positive sentiments but at the same time added that greater reforms are needed for foreign direct investment in the manufacturing sector.

A lot of businesses and companies are looking towards India as an investment destination as they try to diversify away from countries including China, Gopinath further said.

Commenting on India’s growth rate, the top IMF official said in the current fiscal, it is 6.8 per cent while it would be 6.1 per cent for the next financial year.

Leverage G20 presidency to boost service exports: Rajan

Meanwhile, former governor of RBI Raghuram Rajan has advised that India should leverage it’s G20 presidency to seek greater openness towards service exports.

In an interview during the ongoing WEF meeting at Davos, Rajan said too much investment is going towards chip making globally, which could lead to a glut.

He also pointed out towards possible risks for India economy due to opening up of China.

India is doing well in service export, the former RBI Governor said.

He added if India could use its G20 presidency to push for greater openness towards service exports, it could help push India’s growth.

On the excessive focus towards investments in chips, Rajan said the world doesn’t require so many chips and it shows a lack of trust between countries as everyone wants to secure themselves by focusing on domestic manufacturing.

On China’s reopening, he said if it leads to global commodity prices edging up, then it could create problems for India as the current account deficit is already high.

He told that China is back pedalling on some of the COVID policies just to stabilise its economy.

“From India’s perspective we would like commodity prices to be lower. Right now, the guess is as China comes up, commodity prices will go higher. And that will be a problem for India which is already running a fairly significant current account deficit.

“The price of oil plays an important role. But I think if commodity prices stay lower, then to some extent some of our inflationary issues become less important than they are. Our core inflation is still something to worry about,” he was quoted as saying.