India continues to remain a relative “bright spot” in the global economy and will alone contribute 15% to global growth in 2023, International Monetary Fund (IMF) Managing Director Kristalina Georgieva has said.
As digitalization has lifted the world’s fifth-largest economy from pandemic lows, prudent fiscal policy and strong capital investment financing in next year’s budget will help maintain the growth momentum.
“India’s performance has been quite impressive. For this year, we expect India to maintain a high growth rate of 6.8% for the year ending March. For the financial year 2023/24 (April 2023 to March 2024), we expect 6.1%, a bit of a slowdown like the rest of the global economy, but well above the global average.And in this way, India provides about 15 % of global growth in 2023,” Georgieva told PTI in an interview.
This is the fastest growth rate among major economies.
India remains a bright spot at a time when the IMF expects 2023 to be tough, with global growth slowing from 3.4% last year to 2.9% in 2023, she observed.
“Why is India a bright spot? Because firstly, the country has been very successful in turning digitalization which is already progressing quite well into a major driver to overcome the impact of the pandemic and create opportunities for growth and jobs,” said the manager. The director noted.
“Secondly, because India’s fiscal policy has been sensitive to economic conditions. We have seen the new budget presented, and it signals commitment to fiscal consolidation, while providing significant funding for capital investments. And thirdly, because India hasn’t shy away from learning from the pandemic and implementing very strong policies to overcome what has been a really difficult time for several months,” said she declared.
Responding to a question, Ms Georgieva said she was impressed with two elements of the latest annual budget presented by Union Finance Minister Nirmala Sitaraman. “Overall a very, very thoughtful job by the finance minister.” “The first is the careful balance between development needs and fiscal responsibility in India. So you have a realistic budget on the revenue side, focused on growth-supporting spending. And second, the capital investment expenditure, which is there to provide the long-term foundation for growth,” she said.
Ms Sitharaman in the FY24 budget announced one of the largest ever increases in capital spending to create jobs, but avoided outright populism in the last full budget ahead of the general election due in 2024 Capital investment is up sharply for the third year in a row by 33% to ₹10 lakh crore.
The increase in capital spending, which would represent 3.3% of gross domestic product (GDP), will be the largest of its kind after an increase of more than 37% between 2020-21 and 2021-22.
“I have particularly noticed how India is paying close attention to investments in the green economy, including renewable energy that has the potential to move the country towards clean energy and sustain growth. What we see as One potential for the future is to translate this fiscal responsibility into a medium to long-term framework that further anchors India’s public finances,” Ms. Georgieva said.
According to Ms Georgieva, India took “a very brave step with digital ID” which laid the foundation for digitalization on the scale we know today. And COVID has acted as a trigger to drive digitalization forward as it has made it both necessary and possible to provide public support to households and businesses using digital platforms, she noted.
“What is unique about India is the fact that this public digital infrastructure is built in a very nimble and welcoming way. So private initiatives can tap into and benefit from this public infrastructure while supporting the growth and jobs in India What is replicable is this concept of open and holistic approach to digitization using key building blocks.
“And of course, India’s G-20 Presidency provides an opportunity for India to share this experience, more widely, especially with the developing world, so that other countries can jump in like India did. did with this thoughtful approach to digitization,” she said.
Responding to a question, she said that what the international community has learned through the shocks of the pandemic, of the war in Ukraine is that countries with strong fundamentals are much more resilient to these shocks, the same how people with strong immune systems withstood the heat of COVID-19.
“What that means for India is to continue to build that strong fundamental. What we’ve seen in the last year is great progress in revenue collection. The fact that India has been working on its tax administration, persevered with the goods and services tax and is beginning to expand the personal income tax, has made it a much more efficient country and in a better fiscal position.
“I can’t say enough about what India is doing to open space for entrepreneurs. It shows in the digital space. India has built a public digital infrastructure that is so well suited for entrepreneurs to Private initiatives are integrating to take advantage of this infrastructure,” she says.
The results are not only impressive for India, but have also sparked interest from other countries. “And last but not least, India has a young population. 15 million people are added to the labor force every year. When you have a strong investment climate that generates jobs, that’s a great advantage. And India has underutilized its women in the past. Prime Minister Modi is very clear. Women can be a fabulous engine for India’s growth,” she said.
“And what is being done there? I can only say that is the direction to go, to make sure that the legal framework is beneficial for women to participate in the labor force. That access education for women is the same as for men. That we pay a lot of attention to safety, so that women can go to work,” said Ms. Georgieva.
Then she gave a personal experience in India. “I was lucky enough in Mumbai to ride in a women-only car on a train. Women have told me that the security they are given makes a huge difference. They go to work, they go to study. So many reforms in India to take advantage of this strength of the Indian economy, young population and talent pool for innovation.”