India is poised to maintain its status as the world's fastest-growing economy, according to Krishna Srinivasan, Director of the International Monetary Fund (IMF) Asia Pacific Department.
In an interview, Srinivasan revealed that India's strong macroeconomic fundamentals are key to sustaining this growth, projecting a 7% growth rate for FY2024-25, supported by a recovery in rural consumption due to favorable harvests.
"India is expected to remain the fastest-growing economy in the world," Srinivasan told PTI. "We project growth at seven percent in FY24-25, driven by recovering rural consumption." Inflation is also expected to moderate to 4.4% in the same period, despite some food price volatility.
Strong Economic Fundamentals
Despite the upcoming general elections, Srinivasan expressed confidence in India’s economic outlook, citing steady fiscal consolidation, robust foreign reserves, and overall sound macroeconomic fundamentals.
“India’s macroeconomic position is strong. Fiscal consolidation remains on track, the reserve position is solid, and inflation is set to decrease,” he stated.
Key Reform Priorities for Post-Election India
Looking ahead, Srinivasan outlined three key reform areas for India post-elections:
Job Creation: Srinivasan emphasized the importance of implementing labor codes approved in 2019-2020 to create a more flexible labor market while providing social protection. "India must focus on creating jobs, and the labor codes are vital to making labor markets more dynamic," he said.
Trade Liberalization: He urged India to reduce trade barriers to enhance competitiveness, arguing that liberalizing trade policies would benefit productive firms and create jobs. “Removing trade restrictions will drive competitiveness and job creation," he noted.
Infrastructure Development**: He highlighted the need for improvements in both physical and digital infrastructure, coupled with land and agricultural reforms, as essential steps to support sustainable growth.
Investing in Education and Skills
Srinivasan also called for increased investment in education and workforce skilling to meet the demands of a rapidly growing services sector. "In an economy that can generate jobs in the services sector, having a skilled workforce is critical," he said.
Reducing Bureaucratic Red Tape
One of the significant hurdles for investors in India, according to Srinivasan, is bureaucratic red tape, which hampers ease of doing business. He pointed to difficulties in acquiring land for large projects and exiting ventures as key examples. “Streamlining bureaucratic processes is crucial to improving India’s business environment,” he added.
Labor Market Challenges
Srinivasan noted that India's unemployment rate has fallen to 4.9%, and both labor force participation (56.4%) and the employment-to-population ratio (53.7%) are rising. However, he expressed concern over the trend of workers gravitating toward low-productivity sectors, particularly agriculture, and stressed the need for higher-quality job creation.
He also highlighted the low female labor force participation and high youth unemployment as areas that need urgent attention. “Female labor participation is still on the lower side, and youth unemployment remains a significant challenge,” Srinivasan said, calling for a stronger focus on creating a conducive environment for job generation.
With these reforms, Srinivasan believes India can further solidify its position as a global economic leader while addressing key social and structural challenges.
