IMF backs Modi government’s economic policies; sees India as bright spot amid global slowdown

IMF views India playing a bigger role in the global trading system and pushing global growth going ahead

April 18, 2024

Amid gloomy global scenario, India’s economy is buoyed by strong public investment and service sector growth: IMF

The IMF’s World Economic Outlook report, released on Tuesday, has not only raised India’s growth forecast by 0.3 percentage points to 6.8 percent for 2024-25 but also sees the country as a bright spot “supporting global growth over the medium term and spill over to other countries”.

As India is the fastest-growing emerging economy, multilateral institutions such as the IMF and UNCTAD view India as a potential driver of global economic growth going ahead.

Amid India’s growth, China’s GDP growth has been pegged at 4.6 percent in 2024 and is expected to slow down further to 4.1 percent in 2025.

With China left behind after the crash in its real estate sector and US sanctions triggering an economic slowdown, the IMF report views India and other G20 large emerging market countries such as Brazil playing a bigger role in the global trading system and pushing global growth going ahead.

The IMF report also vindicates India’s economic policy as it attributes the robust growth rate to a “strong domestic demand”, which has been created by a huge increase in government expenditure on large infrastructure projects such as highways, railways, ports, and power plants along with a revival in rural demand.

The latest UNCTAD (UN Conference on Trade and Development) report, released on Tuesday, forecasts global economic growth at 2.6 percent in 2024, barely above the 2.5 percent threshold commonly associated with a recessionary phase.

However, amid the gloomy global scenario, it states that India’s economy is buoyed by strong public investment and service sector growth, with a forecasted expansion of 6.5 percent in 2024.

India is expected to maintain its rapid pace of road construction with the addition of up to 13,000 kilometres in 2024-25, an increase of 5 to 8 percent over the previous year, according to a report released by rating agency ICRA on Tuesday.

“The pace of execution in this fiscal will be supported by a healthy pipeline of projects at above 45,000 km as of March 2024, increased capital outlay by the government, and focus on completion of projects by the Ministry of Road Transport and Highways, ” the report states.

Modi Government’s investment in highway infrastructure shot up more than four-fold to a staggering Rs.2.4 lakh crore in 2022-23 from Rs.51,000 crore in 2013-14.

During the 10-year tenure of Prime Minister Narendra Modi’s government, over 90,000 kilometers of national highways have been built which is almost twice that constructed in the preceding 10 years, according to official figures.

Stepped-up allocations for agriculture, rural employment schemes such as MNREGA, and special program for women self-help groups have helped to bolster rural demand and create a larger market for industrial products.

Government investments in big infrastructure projects create more jobs and incomes that have a multiplier effect on the economy as demand for products such as steel and cement also go up, which leads to more private investments and employment.

With the creation of more jobs demand for consumer goods also increases leading to a further acceleration in the country’s economic growth rate.

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