imf: India shines as a global growth leader, contributing over 16% to the world’s growth: IMF

2023-12-19 02:19:50

India’s robust economic growth, propelled by key reforms in digitisation and infrastructure, positions it as a leading global contributor, accounting for over 16 per cent of the world’s growth, according to the International Monetary Fund (IMF). In an interview with PTI, Nada Choueiri, the Mission of India at IMF, highlighted India’s exceptional performance among its peer countries, citing it as one of the fastest-growing large emerging markets.

The recently released annual Article IV consultation with India by the IMF affirms the nation’s trajectory to become one of the fastest-growing major economies globally. Despite this positive outlook, India faces global challenges, including a slowdown in worldwide growth in an increasingly fragmented world, cautioned Choueiri.

The Indian government’s emphasis on infrastructure investment and logistical development sets a solid foundation for sustained growth, according to Choueiri. With a large, young, and growing population, India possesses significant growth potential, which, if harnessed through structural reforms, might result in even stronger growth rates.

Key among the structural reforms is the flagship initiative of digitalisation, a process that has been evolving over several years, positioning India for increased productivity and future growth. The IMF’s annual report recommends focusing on replenishing fiscal buffers, ensuring price stability, maintaining financial stability, and accelerating inclusive growth through comprehensive structural reforms while preserving debt sustainability.

India’s economy has rebounded strongly from the pandemic, becoming a key driver of global growth. The report notes that headline inflation, though volatile, has moderated on average. Employment has surpassed pre-pandemic levels, with the informal sector dominating, while formalization progresses. The financial sector remains resilient, and although the budget deficit has eased, public debt remains elevated.

The report anticipates general elections in April 2024, acknowledging that macroeconomic policies have partially aligned with past IMF staff advice. The potential for higher growth in India lies in implementing comprehensive reforms, including the utilization of additional labor and human capital.Observing a GDP growth of 7.2 percent in fiscal 2022/23, the IMF attributes growth to robust consumption, strong investment, and high levels of public capital expenditure. Despite a slowdown in services export growth in early FY2023/24 due to a global demand slump, GDP growth remains strong at 7.8 percent in FY2023/24Q1, driven by robust domestic demand.Political stability is crucial for investment and growth, notes Choueiri, emphasizing the importance of a transparent and predictable business environment. The government’s efforts to improve the business climate, such as the single national window, are acknowledged, though Choueiri suggests further simplification is needed.

The IMF advocates for labor reform, emphasizing the need to fully utilize India’s abundant labor force. This involves concerted efforts in education, skilling, and increasing female labor force participation.

Despite India’s positive trajectory, Choueiri points out external challenges, including risks from fragmentation and medium-term risks from climate change. Recognizing India’s resilience, she emphasizes the importance of addressing key policies to fully harness the nation’s potential.

(Inputs from PTI)

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