The IMF released its annual Article IV consultation with India on Monday, noting the country’s status as one of the fastest-growing major economies globally this year, thanks to prudent macroeconomic policies. India’s robust growth, propelled by reforms in digitization and infrastructure, is expected to contribute over 16 percent to global growth, according to the IMF.
The report points out that India’s economy has rebounded strongly from the pandemic, becoming a significant driver of global growth. Headline inflation has moderated on average, though remaining volatile. Employment has exceeded pre-pandemic levels, with the informal sector dominating while formalization progresses.
The IMF projects continued strong growth in India, with real GDP expected to grow at 6.3% in FY2023/24 and FY2024/25. Headline inflation is predicted to gradually decline, and the current account deficit is set to improve. Digital infrastructure and a government infrastructure program are expected to sustain future growth.
Risks to the outlook include a potential global growth slowdown affecting India through trade and financial channels, supply disruptions causing commodity price volatility, and domestic weather shocks reigniting inflationary pressures. On the positive side, stronger consumer demand, increased private investment, liberalization of foreign investment, and labor market reforms could boost growth.
The report recommends that India’s policy priorities include replenishing fiscal buffers, ensuring price stability, maintaining financial stability, and promoting inclusive growth through structural reforms while preserving debt sustainability.
The report acknowledges India’s 7.2% GDP growth in fiscal 2022/23, supported by robust consumption and strong investment. Service export growth reached a decade high in FY2022/23 due to global demand for outsourcing induced by the pandemic.
According to the report, India’s economic strength and strategic policy measures position it as a key driver of global growth, showcasing the potential for sustained prosperity through comprehensive reforms.