India Emerges as Fastest-Growing Economy in the World, IMF Executive Director Says

India‘s economy has been hailed as the fastest-growing globally, according to the International Monetary Fund (IMF) executive director, Krishnamurthy V. Subramanian. The recent announcement came after India’s third-quarter GDP astonishingly exceeded analyst projections, expanding at a remarkable rate of 8.4% – the highest in six quarters.

The positive growth momentum in India was attributed to robust private consumption, buoyant manufacturing, and construction activities, as revealed in the data released late Thursday. Estimates by Reuters had previously forecasted a lower growth of 6.6% for the October to December timeframe.

Subramanian expressed optimism for India’s continued strong growth trajectory, predicting an estimated 8% growth rate for the current year. The Indian government, on the other hand, revised its GDP growth outlook for fiscal year 2023-24 upwards to 7.6% from the earlier forecast of 7.3%.

The prominent economist highlighted that the growth surge in India was a result of the government’s increased focus on higher capital expenditure, a key factor driving economic expansion in recent years.

India’s Finance Ministry unveiled a detailed budget in early February, projecting a substantial GDP growth rate of 6%. The budget also outlined plans to enhance infrastructure spending, with a significant boost in capital expenditure. Tax revenue for the fiscal year was projected to increase to 38.31 trillion rupees, alongside an 11.1% rise in capital expenditure to 11.11 trillion Indian rupees.

Subramanian anticipated a continuation of prudent fiscal measures in the upcoming full union budget following India’s general elections. The emphasis on capital expenditure is expected to persist, reflecting responsible fiscal planning in the economic landscape.

The encouraging GDP figures have lent substantial support to Prime Minister Narendra Modi‘s economic track record, particularly in the lead-up to the national elections scheduled for April-May. This growth momentum is likely to influence the Reserve Bank of India’s policy stance, with expectations of maintaining the current interest rate at 6.5% for the foreseeable future, as noted by analysts at Commerzbank.