Indian Economy: Recent days have seen the First Deputy Managing Director of the International Monetary Fund (IMF), Dr. Gita Gopinath, report the good news concerning the Indian economy to the rest of the world. In an exclusive conversation with India Today News Director Rahul Kanwal, Gopinath revealed that economic growth in India had outshined its previous expectations. Beyond just lifting the spirit, it has brought out the country’s capacity to transform into the world’s third-largest economy by 2027.
IMF’s Optimistic Outlook on India’s Economic Growth
She said Gopinath had stated that India’s growth trajectory has proved to be significantly better than was earlier anticipated. She attributed this dimension to a host of factors, including strong private consumption recovery. “India’s growth did much better than we expected last fiscal year, and those carryover effects are impacting our forecast for this year,” Gopinath said.
It revised its growth projection of FY 2024-25 for India to 7 per cent, above the Union government’s most conservative estimate of 6.5 per cent. The revision is based on the latest data for sales of fast-moving consumer goods and two-wheelers, plus the impact of favorable monsoons.
Impact of Rural Consumption on Economic Forecast
She said, “Last year, if you looked at private consumption growth, it was around 4%. We expect that to increase, driven by the recovery in rural consumption. We’re already seeing that if you look at two-wheeler sales and if you look at, you know, the so-called fast moving consumer good sales.”
She added, “You’re seeing that coming back up. The better monsoons that have happened, we expect will generate better harvests. And because of that, with agricultural incomes going up, we should see a recovery in rural consumption. So those are the two factors behind our upgrade.”
Improvements in rural consumption are also supporting the increase in the IMF’s forecast. According to Gopinath, “Rural areas have been under a lot of economic stress. We are seeing, actually, quite a revival in rural spending at this point. That’s first off. In addition, rural consumption appears to be coming back from the uptick in two-wheeler and FMCG sales.”.
The IMF’s latest projection shows that the country is bound to rise as the third-largest economy in the world by 2027, which attests to the strong potential and resilience of the Indian economy. Underneath these are a decent combination of strong private consumption, a favorable base in agriculture, and increased economic conditions that seem to open up possibilities of significant economic touchstones in the next couple of years.
