India navigated fiscal setbacks to post high growth rate: International Monetary Fund official

New Delhi, April 19

An Indian-origin official of the International Monetary Fund said India had successfully navigated multiple shocks in recent years to become one of the fastest growing major economies in the world.

However, IMF Executive Director Krishna Srinivasan defended the current government’s strategy of public investment driving growth, and maintained that it had not crowded out private investment but admitted it was “on the weaker side”.

“We also see consumption picking up with inflation coming down right now…We expect it to come down even further,” he said.

Late last month, the IMF had publicly contradicted Subramanian’s statement that the Indian economy could grow at 8 per cent for the next two decades. After the statement of PM Modi’s previous Chief Economic Adviser Krishnamurthy Subramanian gained traction, IMF spokesperson Julie Kozack had said, “The views conveyed by Subramanian were in his role as India’s representative at the IMF.”

Asked about the downside risks at a briefing by IMF’s Asia Pacific Department on Thursday, Srinivasan said in the short term, volatile global commodity prices could have a significant bearing on prospects in India, especially if crude prices shot up. Food price shocks too could have an impact on economic prospects. Beyond the near term, he mentioned weather-related shocks, risks from geo-economic fragmentation and trade frictions.

Asked about India’s demographic dividend, he said India needed to invest “big time” in both education and health because “you need the right kind of skills… you’re going to face competition from the AI and so on. So this labour force needs to be really equipped to deal with that challenge”.

Meanwhile, the International Monetary Fund has said that West Asian economies would grow at a slower pace this year than it previously projected as the war in Gaza, attacks on Red Sea shipping and lower oil output add to existing challenges of high debt and borrowing costs. The IMF revised down its 2024 growth forecast for West Asia and North Africa region to 2.7 per cent from 3.4 per cent in its October regional outlook.