Innovation, research key to economic growth

Repeated calls of International Monetary Fund (IMF) for all countries to support research and development (R&D) to promote innovation that could help avert slowing growth in the global economy, are essential and badly needed if the world wants to avoid the current economic downturn. While urging for structural reforms, Fund’s operational efforts should be geared towards countries’ shared priorities. It has to focus on structural reforms within its traditional areas of expertise — namely, fiscal structural and financial sector reforms. These areas globally need overhaul to stir
stagnation to steer the wheel of the global economic growth once more.
“Fiscal policy can play an important role in stimulating innovation through its effects on research and development (R&D), entrepreneurship, and technology transfer,” the IMF said in a report ahead of its twice-yearly meeting in Washington in April.
The IMF urged advanced economies to invest 40 per cent more in R&D on average than they do currently, which could in the long run increase the gross domestic product through technology transfers. Further innovative researches would avail more creative ideas that could enhance production.
Apart from the innovation drive, the IMF put stress on a number of steps that could spur the growth, notably, curbing public spending in the longer term through encouraging private sector, raising the retirement age, as many in this category have earned skills that could enhance the work quality and reduce dependence on pension. It also called for reviewing tax regime in many countries as well as focusing on the infrastructure development projects.
The IMF is sceptical about handling of the fiscal policies by governments which are not exerting harder efforts to coordinate their fiscal policies more intelligently. As no country is isolated, the IMF believes the global slump persists partly because of international spillovers.
Indeed, better coordination is vital as it could help keep recession at bay. Countries that could safely deploy fiscal stimulus would give some weight to global as well as national conditions, and fiscal policy would be formed interactively.
But the key driving word to improve productivity is innovation that could be harnessed through investing in research, entrepreneurship, and technology transfer. The technology transfer from advanced economies to emerging and developing states can help in strengthening the growth that would in turn
enhance the global economic growth.
The IMF structural reform theme was earlier echoed by the recent G20 summit, which emphasised the essential role of structural reforms in ensuring strong, sustainable and balanced growth. It called for taking actions to foster confidence, preserve and strengthen the recovery through using all policy tools, including monetary, fiscal and structural measures.
The IMF’s strong push for the implementation of structural reforms to beat the prospects of global recession holds key to sustainable development. Therefore, infrastructure development projects to create more investment opportunities and jobs are necessary. These could contribute to diversified financing instruments for infrastructure and SMEs with special attention to equity financing by promoting capital markets development, and institutional investors.
The world can reverse the slowing economic global growth. Should all countries come together to coordinate in the fiscal policies and implement structural reforms recommended by the IMF, looming recession would be averted.