Vantage | How India beat the global slowdown

In the face of global economic uncertainties, India shines as a beacon of economic resilience, as acknowledged by the International Monetary Fund (IMF). The IMF’s annual assessment of India’s economic performance reveals key factors contributing to the nation’s success, defying concerns of a looming global slowdown and a potential recession in 2024.

India’s economic performance

Rapid economic growth: The IMF identifies India as one of the world’s fastest-growing economies earning the coveted title of a “star performer”. Projections indicate a remarkable 6.3 per cent growth in India’s Gross Domestic Product (GDP) for the current financial year, positioning the country to contribute a substantial 16 per cent to global economic growth. Alongside China, India emerges as a pivotal engine driving the world economy countering prevailing global economic pessimism.

Infrastructure investment driving growth: A pivotal factor in India’s economic resilience lies in its substantial investment in infrastructure. With an allocation of approximately $120 billion, India aims to expand its infrastructure significantly, encompassing roads, railways and hospitals. The IMF underscores the doubling of infrastructure spending to reach 143 lakh crores in the next five years providing a substantial impetus to economic growth.

Positive indicators: India’s economic indicators including inflation, employment and deficit present a positive outlook, according to the IMF assessment. Gradual control over inflation, decreasing from 7.4 per cent in July to 4.8 per cent in October, is attributed to strategic decisions, such as India’s proactive management of critical oil imports, navigating geopolitical challenges.

Challenges on the horizon

Global headwinds: Despite India’s economic success, the IMF outlines three major challenges. The anticipated global economic slowdown in 2024 poses a threat to India’s export-driven growth potentially leading to reduced investments and consumer spending.

Addressing population challenges: India’s massive population, viewed as an advantage, necessitates strategic investments in health and education. The IMF recommends encouraging more women to join the workforce, implementing labour market reforms and increasing investments in health to ensure sustained and inclusive growth.

Weather shocks and agricultural concerns: India’s reliance on agriculture faces challenges due to unpredictable weather shocks. Current projections indicate a 12 per cent decline in sugar output and an 8.4 per cent fall next year, primarily attributed to insufficient rainfall. This raises concerns about potential sugar imports in 2024, impacting global prices.

Exchange control: While praising India’s overall economic performance, the IMF expresses concern about the nation’s exchange control policies. The active role of the Reserve Bank of India in stabilising the rupee by selling dollars prompts the IMF to reclassify India’s exchange regime from “floating” to a “stabilised arrangement.”

India’s economic resilience stands out amid global challenges with the IMF acknowledging its stellar performance. Strategic investments in infrastructure, prudent economic policies and geopolitical decisions have shielded India from the worst of global economic uncertainties. However, challenges such as global headwinds, population management and weather-related shocks require continued attention to sustain the country’s growth trajectory.

Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.

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