‘Structural reforms key to achieve $10 trillion GDP’

WASHINGTON: India has emerged as “a bright light” at a time when the world is facing imminent prospects of a recession, the chief economist of the International Monetary Fund (IMF) has said, noting that the country, however, needed key structural reforms in order to achieve the ambitious target of being a $10 trillion economy.

Pierre-Olivier Gourinchas, chief economist of the IMF said: “Well, India is, I want to say, sort of bright light. The Indian economy has been doing reasonably well.” In its World Economic Outlook on Tuesday, the IMF projected a growth rate of 6.8 per cent in 2022 as compared to 8.7 per cent in 2021 for India.

The projection for 2023 slides down further to 6.1 per cent, he noted. To a question on the ambitious goal of India becoming a $10 trillion economy, Gourinchas said he certainly believes this is achievable.

“I mean, we’ve seen a number of countries grow at very fast rates in the past and really develop very rapidly. So, I think it’s certainly, now it’s not necessarily an easy task, but I think, yes, there is certainly an enormous potential for an economy like India,” he said. To do so, India needs to carry out a number of structural reforms, he observed. “There have been a number of reforms already,” he said.

For instance, India is very much at the forefront of digitalisation, he said. ‘’The way these digital tools can be deployed to improve financial inclusion or to facilitate access to administrative services, and things like that. And that is a testimony to the sort of innovation in that sector that is happening in India,’’ he observed.

“But beyond that, there are needs for reforms that will actually boost potential growth,” Gourinchas said.

“Here, of course, we can think about improvements on the health side, we can think about improvements on the education side, social spending, digital literacy and access, we can think about infrastructure,” he suggested. “There is a range of areas where, you know, public infrastructure broadly defined, not just in terms of buildings and roads, but also investing in human, investing in people and human capital, health, education, etc is going to help the economy really, really grow very fast on a continuous basis,” said the IMF chief economist. To a question, the chief economist said the Indian economy had rebounded from the pandemic downturn.

The slowdown between 22-23 is going to be reflecting basically, the fact that the global economy is also slowing down and that the external factors are going to reflect on today’s economy, high energy prices, the slowdown in external demand and the weakening of global confidence in general, he stressed.

“So that’s weighing down a little bit. The revision downwards that we have in 2022 is again due to some of the tighter financial conditions and external conditions. But there was a little bit of a weak first quarter of the fiscal year that has factored into the revision,” he said. The Indian economy is a bright spot in today’s world because its growth is still fairly robust, he said.

“...In a picture where all the other economies and advanced economies, rarely grow at that speed, but even other large countries don’t do as well in the current year or next year in our projections. So it’s certainly extending out,” Gourinchas said.

‘India will have a difficult task as G-20 chair’

India, which will hold the G-20 presidency next year, will have a difficult task as the group’s chair to bring countries together on some of the key challenges being faced by the world, the chief economist said on Wednesday. “One of the challenges for the G-20 right now, as we’ve seen, is of course how to deal with geo-economic fragmentation. And geo-economy fragmentation is just reflecting the fact that we’ve seen enormous tensions following the Russian invasion of Ukraine,” Gourinchas said. “To some extent to the G-20, it’s much harder to have these kinds of conversations around the common goods in the current environment because there is all this tension related to geopolitical considerations. And so, India will have a difficult task, but also, I would think one of the important objectives will be to keep the countries at the table, to keep the discussion going, keep progress being made on important issues,” he said in response to a question. Describing G-20 as a very important institution, Gourinchas said the group is the one place where there is governance representing the majority of the global economy coming together. It is not just a group of rich countries. It is really something that has multiple voices. A lot of progress can be made by G-20, he said.