• UGI USER
  • Dec 20, 2023
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India’s role in global economy growth: IMF

News

  • India has become a standout performer and is expected to drive over 16 percent of global growth as claimed by International Monetary Fund (IMF).
  • The IMF made this claim while noting that economic reforms in important areas like infrastructure and digitization have allowed the country to grow at a strong rate.
  • India’s economy is expected to grow at one of the fastest rates among major economies globally this year, supported by prudent macroeconomic policies, according to the IMF’s annual Article IV consultation with the country.
  • In an interview, Nada Choueiri, the Indian Mission at the IMF, stated that the country in South Asia is one of the major emerging markets with the fastest rate of growth, accounting for over 16 percent of global growth.
  • India’s prime minister has stated that the country’s quick economic expansion benefits both its people and the world economy.

India’s potential for economic growth

  • Growth accounting: Growth accounting provides a useful framework for analyzing medium-term prospects by decomposing their drivers into capital, labor, and efficiency contributions.
  • Economic growth over the next five years: 52 percent of the Indian economy is expected to come from capital, 38 percent from efficiency, and 10 percent from labor. This represents an annual growth rate of 6.8%.
  • Modifying the growth model: A manufacturing- and infrastructure-driven model is replacing the current one.
  • Capital spending: In high-multiplier infrastructure segments, capital spending has increased by nearly a third according to the Union Budget. However, given the pressures of fiscal consolidation, such support for capital expenditures will likely moderate in the coming years.
  • Investment ratio: In fiscal 2023, investment as a percentage of GDP reached a record-breaking 34%. Up until now, the government has been the one responsible for raising the investment ratio. With healthier balance sheets, cash reserves, and low leverage, the private sector’s contribution to investments is expected to increase.
  • Productivity contribution to growth:
    • The development of physical and digital infrastructure, in conjunction with efficiency-enhancing reforms, will increase productivity’s contribution to growth.
    • Efficiency gains in the economy from reforms like the Insolvency and Bankruptcy Code (IBC) and GST are anticipated to continue.
  • Demographic Dividend: The population of India is relatively young. Every year, 15 million more people enter the workforce. An excellent investment environment that creates jobs is India’s biggest asset. India’s growth can be greatly accelerated by women.
  • Investment in the Green Economy: The nation’s fiscal prudence is reflected in a medium-term framework that is firmly anchored in public finances. India is also making investments in the green economy, particularly in renewable energy, which has the potential to move the nation toward clean energy.

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Disclaimer: All efforts have been made to represent India accurately and as per India government. However, Universal School of Administration, Bengaluru and its associated people do not own any responsibility for the correctness or authenticity of the same. Please notify on the email: [email protected] if any inconsistency is found for the factual correctness.