The International Monetary Fund (IMF) assesses the global economy twice a year. The multilateral financial institution recently released a new edition of its flagship World Economic Outlook. It makes for a sobering read. Forecasts for the five years to 2028 show economic momentum slowing in most countries. India is a rare exception. Roshan Kishore has already written in the Hindustan Times that if the predictions published in the report stand the test of time, India will become the fastest growing large economy in 11 of the 15 years starting in 2014. He points out that it is.
The International Monetary Fund (IMF) assesses the global economy twice a year. The multilateral financial institution recently released a new edition of its flagship World Economic Outlook. It makes for a sobering read. Forecasts for the five years to 2028 show economic momentum slowing in most countries. India is a rare exception. Roshan Kishore has already written in the Hindustan Times that if the predictions published in the report stand the test of time, India will become the fastest growing large economy in 11 of the 15 years starting in 2014. He points out that it is.
Hello! You are reading a premium article! Subscribe now to read more.Subscribe now Already subscribed? Login
Premium benefits
35+ premium articles every day
Specially selected newsletters delivered daily
Access over 15 print articles every day
Subscriber-only webinars with expert journalists
E-papers, archives, select articles from the Wall Street Journal and The Economist
Access to subscriber-only benefits: Infographics I Podcast
Well-researched to unlock 35+
daily premium articles
Access to global insights
100+ exclusive articles from
international publications
Free access
3 or more investment-based apps
TRENDLYNE Get 1 Month GuruQ Plan for Rs.
FINOLOGY 1 month free subscription to Finology.
SMALLCASE 20% off all small cases
Newsletter exclusive to 5+ subscribers
specially selected by experts
Free access to e-paper and
WhatsApp updates
The first graph shows the loss of global momentum. The horizontal axis shows the expected growth rate for a given year, based on IMF forecasts made five years ago. This means that his peak prediction for 2013 was made in 2008, before the North Atlantic Financial Crisis. The IMF has announced that its 2028 global economic growth forecast is the weakest since 1990.
All predictions are subject to error. But the IMF says its forecast models are actually optimistic, meaning actual global growth was almost lower than economists expected five years ago. Consensus forecasts by private sector economists broadly follow similar trends. As a result, the gradual slowdown in the global economy since the financial crisis is unlikely to reverse this decade.
This is an important background when considering India's long-term economic growth. The newspaper reported on Monday that Prime Minister Narendra Modi will release a new economic strategy document in December on what India needs to do to become a developed country by 2047. The strategy is being developed by Niti Aayog in collaboration with senior government officials.
Economists at the Reserve Bank of India estimated earlier this year that India's economy needs to grow at a compound annual rate of 7.6% for the country to reach developed country status by 2047. This is 1.2 to 1.5 percentage points higher than the Indian economy's historical performance. Most economists believe India is currently growing at a rate that allows it to grow without causing high inflation or balance of payments stress.
The broader global economic slowdown predicted by the IMF over the next five years is likely to be a headwind for India, perhaps not enough to slow the economy from its average rate of the past 40 years, but on the verge of a significant acceleration. It will be a challenge. amidst economic growth. India will have to negotiate not only the global economic slowdown but also other challenges, such as rising protectionism in response to the geopolitical situation and the shocks of climate change.
But maintaining current momentum should be more than enough to cement India's position as the fastest-growing large economy (second graph). Before hubris takes hold, it's important to remember that many miracle economies east of the border were growing at least 2 to 3 percentage points faster when they were at the same stage of development. .
Here are some numbers to consider. The world economy is expected to produce an additional $29 trillion between 2023 and 2028. The world's two largest economies, the United States and China, each add $5.9 trillion in additional economic output. This represents about one-fifth of the world's additional economic output. over the next five years. India will add $2.2 trillion and become the third largest contributor to global economic growth.
In an insightful two-part research report, Barclays economists Rahul Bajoria, Shreya Sodhani and Amruta Ghare take an in-depth look at how India's economy will behave in the coming years. They argue that India can accelerate its growth rate after the 2024 elections without jeopardizing its hard-won macroeconomic stability. The basis for the transition to a higher growth trajectory of 8% is an increase in the nominal savings rate (from 30.2% to 32.3% of GDP), an increase in female labor force participation (the rate of increase in India's labor force) 3.5% per year instead of the current 1%), an increased share of world exports (to over 4.5% from the current 2.4%), and an increase in the productivity of capital (this will be accompanied by an increase in the capital-output ratio). ) down from the current 5).
Economists at Barclays also argue that there are potential geopolitical advantages for India as it could overtake China in terms of its contribution to global economic growth. This goes back to the old view that 8% growth is the best foreign policy India can pursue.
There is broad global consensus that India will be one of the few bright spots in a challenging global environment this decade. It could accelerate even in a tough global economy, as some Asian countries did in the troubled 1970s. Increased savings, more efficient capital accumulation, more people (particularly women) in productive work, and increased exports to supplement domestic demand: these are the usual ingredients for increasing sustainable economic growth rates. element.
Get all the business news, market news, breaking news, and latest news on Live Mint. Download the Mint News app for daily market updates.
Source link