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India to Retain Position as World’s Fastest-Growing Economy, Says IMF Official

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Krishna Srinivasan, Director of the International Monetary Fund (IMF) Asia Pacific Department, has projected that India will continue to be the world’s fastest-growing economy, provided its macroeconomic fundamentals remain strong.

India to Retain Position as World’s Fastest-Growing Economy

Speaking in an interview with news agency PTI on Tuesday, Krishna Srinivasan emphasized that India’s growth is expected to reach 7% in the fiscal year 2024-25, driven by a recovery in rural consumption and easing inflation.

Macroeconomic Stability and Growth Outlook

Srinivasan pointed out that the country’s economic trajectory remains robust, bolstered by favorable harvests and improved rural consumption. The agricultural sector’s positive performance is helping sustain domestic demand, which is crucial for the country’s growth. Inflation is expected to ease significantly, dropping to 4.4% during this period, providing further economic stability.

“India is expected to remain the fastest-growing economy in the world. We project growth at 7% in FY24-25, supported by a recovery in rural consumption due to favorable harvests,” Srinivasan told PTI. He added that inflationary pressures are easing, contributing to a stronger outlook for household purchasing power and consumption.

Srinivasan highlighted the resilience of the country’s macroeconomic fundamentals, stressing that fiscal consolidation remains on track despite the upcoming general elections. He also mentioned that India’s reserve position remains strong, further reinforcing the nation’s economic standing. “Macro fundamentals, generally speaking, for India are good. The reserve position is pretty good,” he noted.

Focus Areas for Continued Growth

However, to maintain this growth momentum, Srinivasan underscored the importance of addressing several structural issues. He identified three key areas for reform: job creation, trade barriers, and infrastructure development.

In the context of employment, Srinivasan stressed the need for the effective implementation of labor codes that were approved between 2019 and 2020. He noted that these reforms would not only make the labor market more flexible but also provide social protection to workers. “In terms of jobs creation, focusing on the implementation of labor codes is important. They will allow labor markets to be flexible while giving social protection to workers,” he stated.

Srinivasan also addressed India’s trade policies, suggesting that easing trade barriers could enhance the country’s competitiveness. “When you liberalize trade, you allow the productive firms to survive, which boosts competitiveness. By itself, this can create jobs,” he explained. Reducing trade restrictions could open up new markets, stimulate innovation, and provide Indian businesses with a competitive edge globally.

Infrastructure: The Backbone of Future Growth

The IMF official also underscored the importance of infrastructure development as a critical driver for sustained economic growth. He praised India’s progress in developing both physical and digital infrastructure but emphasized the need for further reforms, particularly in the areas of agriculture and land. “India has made strides in developing infrastructure, but continued focus is needed on agriculture and land reforms,” Srinivasan noted.

He argued that improvements in physical infrastructure, such as transportation and energy, and digital infrastructure, including internet penetration and tech innovation, are vital for supporting the country’s growing population and economy. This, combined with agricultural reforms, could enhance productivity and efficiency across various sectors.

Education, Skilling, and Employment Challenges

Srinivasan also stressed the importance of strengthening education and skilling initiatives to address the challenges of youth unemployment and low labor force participation among women. According to him, an educated and skilled workforce is crucial for sustaining India’s growth in the long run. He suggested that reforms in education would enable India to develop a talent pool that is prepared for the demands of an evolving global economy.

“You have to think in terms of strengthening education and skilling,” Srinivasan emphasized, pointing out that these measures will help India tackle concerns related to youth unemployment and ensure that more women participate in the workforce.

India is poised to remain the world’s fastest-growing economy, supported by strong macroeconomic fundamentals, rural consumption recovery, and easing inflation. However, to sustain this growth and achieve its full potential, the country must address key structural challenges in job creation, trade liberalization, infrastructure development, and education reform. With focused efforts in these areas, India can strengthen its economic foundation and continue its upward trajectory in the global economic landscape.

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