‘Bright spot’ India to contribute 15% to global growth in 2023: IMF
India remains a relative “bright spot” in world economy and will account for 15 per cent of the global growth this year, International Monetary Fund (IMF) managing director Kristalina Georgieva has said.
“India’s performance has been quite impressive. We expect India to retain a high growth rate of 6.8 per cent for the year ending in March. For FY 2023/24, we project 6.1 per cent, a bit of slowdown like the rest of the world economy but way above the global average,” Georgieva told PTI.
“And in that way, India is providing about 15 per cent of global growth in 2023,” she said in an interview, adding this was the fastest growth rate among major economies.
India’s performance comes at a time when the IMF is projecting 2023 to be difficult, with global growth slowing down from 3.4 per cent last year to 2.9 per cent this year, she observed.
A bright spot
“Why is India a bright spot? Because one, the country has done really well to turn the digitalization that has been already moving quite well into a major driver of overcoming the impact of the pandemic and creating opportunities for growth and jobs,” she said.
“Second, because India’s fiscal policy has been responsive to economic conditions. We have seen the new budget presented, and it signals the commitment to fiscal consolidation, while at the same time provides significant financing for capital investments.
“And three, because India didn’t shy away to learn the lessons from the pandemic and to implement very strong policies to overcome what has been really a difficult time for a number of months,” she said.
Georgieva said she was impressed by two things in the latest annual budget presented by Union Finance Minister Nirmala Sitharaman. “Overall, a very, very thoughtful work done by the minister.”
“The first one is how much care is placed on balancing development needs with fiscal responsibility in India. So, you have a budget that is realistic on the revenue side with a focus on growth-supporting spending,” the IMF chief said.
“And secondly, the investment in capital expenditures, that is there to provide the long-term foundation for growth,” she said.
In the last full Budget ahead of parliamentary elections due next year, Sitharaman has announced one of the biggest-ever increases in capital spending to create jobs but shunned outright populism.
Capital investment is being increased steeply for the third year in a row by 33 per cent to Rs 10 lakh crore. The capital spending increase, which would amount to 3.3 per cent of gross domestic product (GDP), will be the biggest such jump after an increase of more than 37 per cent between 2020-21 and 2021-22.
“I particularly noticed how much attention India is paying on investing in the green economy, including renewables with the potential to shift the country towards clean energy and keep growth going,” the IMF chief said.
“What we see as a potential for the future is to translate this fiscal responsibility into a medium-term framework that gives even stronger anchor to India’s public finances.”
According to Georgieva, India has taken “a very brave step with the digital ID” that put the foundation for digitalization on the scale seen today.
Covid-19 played the role of a trigger for advancing digitalization because it made it both necessary and possible to deliver public support to households and to businesses using digital platforms, she said.
“What is unique about India is the fact that this public digital infrastructure is built in a very agile and welcoming manner. So, private initiatives can tap into this public infrastructure and benefit themselves as well as support growth and employment in India. What is replicable is this concept of open, holistic approach to digitalization using key building blocks,” she said.
“India’s G-20 presidency provides an opportunity for India to share this experience, more broadly, especially with the developing world, so other countries can leapfrog the way India did it with this thoughtful approach to digitalization,” Georgieva said.
She said what the world learned from the pandemic and Ukraine war is that countries with strong fundamentals withstand these shocks much better.
“India (must) continue to build this strong fundamental. What we have seen in the last year is great progress in revenue collection. The fact that India worked on their tax administration, persevered with the goods and services tax and is starting to broaden the personal income tax, made it a much more effective and fiscally better position country.
“I cannot praise enough what India is doing to open up space for entrepreneurs. That is visible in the digital space. India put in place public digital infrastructure that is so well attuned for private initiatives to blend in to take advantage of this infrastructure,” she said.
“And last but not least, India does have a young population. Fifteen million people are added to the labour force every year. When you have a strong investment climate that generates jobs, that is a great advantage… Prime Minister (Narendra) Modi is very clear. Women can be a fabulous driver for India’s growth,” she said.
(With agency inputs)