India emerged as one of the “star performers”, the International Monetary Fund (IMF) said on Monday, further adding that it is projected to contribute more than 16 per cent to global growth. India has been growing at a robust rate, said IMF, but pointed out to the global headwinds the economy is facing.
Nada Choueiri, the Mission of India at IMF told news agency PTI, “What we have been observing for quite some time now is that India has been growing at a very robust rate. It’s one of the star performers when it comes to real growth when you look at peer countries. It’s one of the fastest growing large emerging markets and it’s contributing, in our current projections, more than 16 per cent of global growth this year.”
As per IMF’s annual Article IV consultation with India, the South Asian economy is on track to be one of the fastest-growing major economies in the world, assisted by prudent macroeconomic policies. However, India is also facing global headwinds, including a global growth slowdown, said Choueiri.
Choueiri also highlighted the factors that worked in India’s favour, including the government’s push for investments in infrastructure and logistics, a very large and growing population, and structural reforms including digitalisation.
IMF also in its annual report recommended focussing on replenishing fiscal buffers, securing price stability, maintaining financial stability, and accelerating inclusive growth.
India’s economy has rebounded strongly from the pandemic, headline inflation has moderated, employment has surpassed pre-pandemic level and the informal sector continues to formalise, the IMF said. Financial sector has been resilient, budget deficit has eased, public debt remains elevated and fiscal buffers need to be rebuilt, the IMF said.
“On the political front, general elections are expected in April 2024. Macroeconomic policies have been partly in line with the past IMF staff advice,” the report said. Choueiri said that while they don’t have any quantitative analysis, a lot of research already points to the importance of political stability and a clear policy environment.
Choueiri said that while a lot of measures have been taken to encourage the business environment, there are many states that still have a lot of bureaucracy involved and a lot of red tape.
If comprehensive reforms are implemented, India has the potential to experience higher growth contributed by additional labour and human capital, IMF stated.
“India has an abundance of labour. And labour is not used to its potential in India. And so, in our view, there has to be a very concerted effort to make sure that the advantages, and demographics in India are played up to the maximum,” Choueiri said, adding that this means education, skilling, and increasing female labour force participation.
