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Asia and Pacific > India

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Cover IMF Staff Country Reports
India: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for India
International Monetary Fund. Asia and Pacific Dept
Prudent macroeconomic policies have supported India’s economic resilience, with growth expected to recover from a recent softening and inflation expected to converge to target. Risks to the outlook include deepening geoeconomic fragmentation and a slower pace of domestic demand recovery.
Keywords:
IMF article; headline inflation; fund approval; gross investment; potential GDP; Anti-money laundering and combating the financing of terrorism (AML/CFT); Capital spending; Global; Eastern Europe
Cover High-Level Summary Technical Assistance Reports
India - State of Odisha - Public Investment Management Assessment — PIMA and Climate PIMA
International Monetary Fund. Fiscal Affairs Dept.
An IMF team found that the State of Odisha had an overall public investment management (PIM) system that compared well with other emerging market economies, reflecting in particular strong institutions at the execution stage, which have helped the State increase significantly its public investment effort over the last few years. The State also displays some encouraging practices in terms of climate-sensitive PIM. However, several challenges persist and have to do mostly with the first stage (planning, appraisal) and the second stage (maintenance, selection of projects) of the PIM cycle. The team has identified five high-priority recommendations that could improve PIM processes and support the effective implementation of the Government of Odisha’s investment policy and development agenda, including to increase resilience against climate change.
Keywords:
Climate change; Climate policy; Public investment management; Public Investment Management Assessment (PIMA); Public investment spending; India; Odisha; IMF team; PIM process; high-priority recommendation; State action plan; PIM cycle
Cover IMF Working Papers
Growth Convergence and Public Finances of India and its States
Rajan Govil
and
Khyati Chauhan
Lack of convergence in per capita income across Indian states requires greater resources for lower-income states for investment and improved public services. Central and state governments need to raise revenue (both tax and non-tax), dismantle the administered pricing mechanism, reduce subsidies, and reorient expenditure toward national and state-level priorities. This is essential to ensure India remains on a sustainable fiscal path with higher growth, given the high public debt at the centre and state level. The observed wide differences in fiscal parameters across states require a tailored policy for each state. The large stock of debt of several states puts at risk the adequate financing of growth-enchancing expenditures.
Keywords:
India; Growth Convergence; Central and State Public Finances; development expenditure; State public finances; state level; public finances of India; Capital spending; Government debt management; Total expenditures; Global
Cover IMF How To Notes
How to Design and Implement Property Tax Reforms
Martin Grote
and
Jean-François Wen
Property taxes are often under-exploited sources of local public revenues. A broad-based tax, raised at modest rates, can potentially generate significantly higher revenues in many countries, and meet most of the costs of improved local public services. This note provides a practical guide to designing and implementing reforms to recurrent taxes on immoveable property and real estate transfer taxes. It addresses the fundamental policy choices regarding the property tax base and tax rate, and the key functions of the tax administration for managing collections – valuation, billing, and enforcement. The advice in the note stems from a review of the literature and insights gained from the experiences of the Fiscal Affairs Department in delivering capacity development on property taxes. It covers and updates some of the analytical work by Norregaard (2013) while providing granular advice on practical aspects of reforming property taxes. The note is motivated by the resource mobilization needs of developing countries, but the design considerations are also pertinent for advanced and emerging market economies seeking to increase the revenue productivity of property taxes.
Keywords:
property tax; recurrent tax; real estate; real property transfer tax; tax reform; implement property tax reform; property tax tax collection; revenue identity; property tax administration; property tax system; Tax administration core functions; Transaction tax; Estate tax; Africa
Cover IMF Staff Country Reports
Bhutan: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Bhutan
International Monetary Fund. Asia and Pacific Dept
The 2024 Article IV Consultation highlights that Bhutan achieved significant improvements in social conditions during the last decade, raising living standards. Poverty and inequality have declined, while extreme poverty has been eliminated. Growth is projected to accelerate over the medium term as a large hydro-project is commissioned and capital spending is boosted with the support of external grants. Pull factors are expected to slow down emigration, thereby reducing pressures on the supply side. A gradual fiscal consolidation based on revenue mobilization and accompanied by some spending restraint is needed to increase fiscal space and to reduce reliance on external grants in the longer term. Structural policies should focus on fostering high-quality private sector jobs, as well as diversifying exports. There is scope to strengthen the Royal Monetary Authority’s governance framework, as well as to step up anti-money laundering/countering the financing of terrorism efforts. Improvements in data quality have been significant, but further actions are needed to address remaining weaknesses. These include a need for greater transparency on crypto assets operations.
Keywords:
FDI company; foreign exchange resource; cover loan restructuring; capital investment; IMF team; Global
Cover Departmental Papers
Upgrading Fiscal Frameworks in Asia-Pacific
Enrique Flores
,
Pranav Gupta
,
Yinqiu Lu
,
Paulo A Medas
,
Dinar Prihardini
,
Hoda Selim
,
Weining Xin
, and
Masafumi Yabara
This paper seeks to guide the reform of fiscal frameworks in Asia-Pacific in the context of calls for a more active fiscal policy in a shock-prone world. It highlights that the cost of fiscal support is large and that fiscal frameworks, including fiscal rules, are being put to the test given the sharp increase in debt, high interest and weaker growth prospects. The stress is only compounded by long-term challenges like aging populations, climate change and the need to deliver on the sustainable development goals. In this context, it is timely to review the effectiveness of fiscal policy in Asia-Pacific and seek for ways to strengthen fiscal frameworks. After the global financial crisis, fiscal policy in Asia-Pacific became more countercylical and stronger than in other regions—especially in advanced economies. The paper shows that the degree of countercyclicality has been asymetric, with larger responses during periods of weak growth, and in particular in response to large shocks—the global financial crisis and the pandemic. It highlights that responses to the pandemic were large and used a wide range of tools, and how fiscal and monetary policy complemented each as they responded to large shocks. It looks into the deterioration of debt dynamics in Asia-Pacific, as public debt has been rising persistently across most countries driven by declining growth and rising deficits—particualrly after the global financial crisis for advanced economies and after the pandemic for emerging market and low income countries. The paper reviews fiscal frameworks across Asia-Pacific, including the use of fiscal rules, medium-term fiscal frameworks, and fiscal councils. It describes the characteristics of fiscal rules, which usually focus on debt and budget balances and are set by law but tend to lack well-specified enforcement mechanism or escape clauses. It highlights that compliance with the rules has worsened following the pandemic as—in contrast with the outturns before the pandemic--Asia-Pacific countries tend to show larger deviations relative to other regions. It also shows that despite the increase adoption of medium-term fiscal frameworks in Asia-Pacific forward guidance has been hampered by the lack of binding targets and ex-post analysis. Moreover, they do not seem to have resulted in better macro-fiscal forecast in part due to weak capacity and enforcement, lack of integration with the annual budget, and exposure to shocks—with risk analysis mostly limited to qualitative discussions. Proposed reforms seek to implement a comprehensive, risk-based approach to public finances. They focus on strengthening the medium-term orientation of fiscal policy through credible medium-term fiscal plans, fiscal rules linked to the medium-term strategy and the annual budgets, and a stronger reliance on fiscal councils. They also emphasize the need for a broader view of the public sector as fiscal policy is being conducted through multiple channels, which requires assessing and managing vulnerabilities and a significant improvement in fiscal statistics. They also address aging and climate change by focusing on assessing large intergenerational trade-offs, reporting on long-term debt dynamics, and on green medium-term fiscal frameworks that incorporate the effects of climate change and climate policies.
Keywords:
Fiscal Rules Fiscal Frameworks Medium-term Fiscal Frameworks Public Debt Sustainability automatic stabilizers Climate Change Population Aging; Asia-Pacific country; Asia-Pacific economy; Asia-Pacific region; IMF country team; SRDSF country; Fiscal rules; Fiscal governance; Global financial crisis of 2008-2009; Asia and Pacific; Global; Pacific Islands
Cover Technical Assistance Reports
Sri Lanka: Technical Assistance Report-Property Taxation at the National and Subnational Level
International Monetary Fund. Fiscal Affairs Dept.
This report analyzes Sri Lanka’s options for improving the fairness and progressivity of the tax system through the introduction of a nationwide property tax. Given constitutional constraints that limit the taxation of property at the central government level, it recommends taxing the imputed rental value of owner-occupied housing. With a suitable exemption threshold and a progressive tax rate structure, such a tax can support fiscal consolidation by raising revenue from the most affluent members of Sri Lanka’s society while introducing little distortions. Implementation and enforcement of the tax will require substantive investments in data infrastructure, including through the introduction of a digital sales price and rents register. The report also outlines options for improving the fairness and revenue productivity of subnational assessment rates (local property taxes) and suggests additional reforms that can complement the taxation of real property at the national and subnational level.
Keywords:
Property taxation; Imputed rental income tax; Simplified assessment approach; Sri Lanka; Fiscal consolidation.; imputed rental income; central government; roll number; rental contract; market rental value; Property tax; Transaction tax; Income and capital gains taxes; Income; Global; Australia and New Zealand
Cover IMF Staff Country Reports
Nepal: Fourth Review Under the Extended Credit Facility Arrangement-Press Release; Staff Report; and Statement by the Executive Director for Nepal
International Monetary Fund. Asia and Pacific Dept
This paper focuses on Nepal’s Fourth Review under the Extended Credit Facility (ECF) Arrangement. Nepal has made good progress with implementation of the program, despite a challenging political environment. With growth below potential, executing the planned increase in capital spending, as envisaged in the FY24/25 budget, while maintaining fiscal discipline through domestic revenue mobilization and rationalization of current spending remains critical to boost growth and preserve medium-term fiscal sustainability. Monetary policy should maintain the current cautious, data-driven approach to preserving price and external stability. Avoiding further boom-bust credit cycles is critical to establish a more stable, pro-growth equilibrium. Continued progress on the structural front remains needed to foster investment and more inclusive growth. These include improving the business climate, building human capital, and continuing to improve social safety nets, in particular aiming for full execution of the child grant budget, followed by an expansion of the program to all districts in Nepal.
Keywords:
ECF arrangement; UML-NC coalition; Nepali authorities; ECF program implementation; accommodative monetary policy stance; Credit; Debt relief; Global; Asia and Pacific
Cover IMF Staff Country Reports
Union of the Comoros: Second Review under the Extended Credit Facility Arrangement and Request for a Waiver of Nonobservance of Performance Criterion-Press Release; Staff Report; and Statement by the Executive Director for the Union of Comoros
International Monetary Fund. African Dept.
This paper presents Union of Comoros’ Second Review under the Extended Credit Facility (ECF) Arrangement and Request for a Waiver of Nonobservance of Performance Criterion. Performance under Comoros’s economic reform program continues to be broadly satisfactory, and the authorities remain committed to the economic policies and reforms underpinning the ECF-supported program. Reforms are beginning to bear fruit, with visible signs of macroeconomic stabilization. However, Comoros continues to face the challenges of a small, fragile island state which requires steadfast program implementation and continued support from international partners. Monetary policy has contained inflation and ensured sufficient external buffers for Comoros and the stability of the peg. Continued efforts to stabilize the financial sector, including through the restructuring of the state-owned postal bank, addressing credit quality in the banking system, and strengthening banking supervision and resolution capacities are welcome. Support from international partners continues to be important for addressing the country’s large development needs and climate-related risks.
Keywords:
Comorian authorities; Union of the Comoros' Extended Credit Facility; government liquidity; customs administrations IT management systems; ECF arrangement; Arrears; Credit; Government debt management; East Africa; West Africa; Global; Middle East
Cover Analytical Notes
Guidance Note For Developing Government Local Currency Bond Markets
International Monetary Fund
and
World Bank
This guidance note was prepared by International Monetary Fund (IMF) and World Bank Group staff under a project undertaken with the support of grants from the Financial Sector Reform and Strengthening Initiative, (FIRST).The aim of the project was to deliver a report that provides emerging market and developing economies with guidance and a roadmap in developing their local currency bond markets (LCBMs). This note will also inform technical assistance missions in advising authorities on the formulation of policies to deepen LCBMs.
Keywords:
AN; market development; repo market; investor base; reverse repo; government securities; price discovery; banking sector; market-making privilege; market regulation; market fragmentation; repo market development; market infrastructure; Government securities; Securities; Bonds; Securities markets; Government debt management; Global; Africa; East Asia; currency bond markets; IMF expert; government bond market development; bond market reform plans; government debt market; bond market Association; IMF Library; Yield curve; Southeast Asia; Money markets