The International Monetary Fund (IMF) has expressed its approval for India’s ability to sustain fiscal discipline against the backdrop of a pivotal election year, noting that the nation’s economic progress is an exception on the global stage. Krishna Srinivasan, the Director of the Asia and Pacific Department at the IMF, shared his positive take on the country’s economy in an interview with PTI.
“At this point in time, India’s economy is performing commendably. A growth rate of 6.8 percent is quite robust. We are observing a trend of declining inflation, which is crucial. It is essential that inflation meets the target and remains steady,” Srinivasan conveyed. He emphasized the crucial aspect of maintaining economic restraint, particularly during an electoral season, as countries often tend to increase fiscal spending during such periods.
“This government’s commitment to maintaining fiscal equilibrium is noteworthy and is the cornerstone for long-term prosperity and consistent economic development,” he added.
India has demonstrated remarkable resilience in weathering a variety of economic shocks over recent years and is poised to become one of the fastest-growing major economies on the global stage. “For the upcoming fiscal year of 2024-25, we project a robust growth rate of 6.8 percent, which will be propelled by private consumption and significant public investment. We are seeing a gradual reduction in inflation, currently just below the 5 percent mark,” Srinivasan reported.
According to the latest statistics from the Reserve Bank of India (RBI), India’s foreign exchange reserves have seen a significant upward trend, increasing by USD 2.98 billion, reaching a new high of USD 648.562 billion as of the week ending April 5.
In his remarks, Srinivasan highlighted the balanced risk outlook for the Indian economy. “Short-term risks revolve primarily around volatile commodity prices influenced by global tensions. However, looking ahead, one must consider the impact of climate-related events and the potential for economic fragmentation. On the upside, heightened private consumption and capital expenditure could further bolster economic growth,” he elucidated.
The IMF official underscored India’s pivotal role as a main engine driving global growth. “In light of robust private sector involvement and substantial public investments, we anticipate that India will contribute nearly 17 percent to global economic growth this year, solidifying its status as an economic bright spot,” Srinivasan mentioned.
Digital Public Infrastructure (DPI) stands out as another driver for India’s dynamic economic landscape. “The advent of DPI is a transformative moment, facilitating competition and spurring innovation. It promises greater efficiency in the public sector while also expanding financial inclusion. We regard these developments as highly substantial, further reinforcing India’s global economic stature,” he continued.
Furthermore, Srinivasan recognized India’s demographic advantage, with a substantial segment of the population entering the workforce each year. However, he emphasized the necessity for reforms to fully capitalize on this young demographic. Investment in education and health are critical in maximizing this demographic dividend, allowing the younger workforce to skillfully navigate and integrate with advances such as artificial intelligence.
Reforming labor markets, reducing trade restrictions, and enhancing ease of doing business are key long-term strategies for sustaining growth. Additionally, improved macroeconomic data dissemination would empower investors to make more informed and lasting investment decisions.
“In summary, we project a medium-term growth rate of 6.5 percent for India. To build upon this growth, a range of reforms is imperative. These steps will ensure the country’s capacity to leverage its youth population and a sustainable expansion of the economy,” concluded Srinivasan, laying out a future-focused vision for India’s economic trajectory.
