New Delhi – India must intensify its focus on implementing further economic reforms to ensure strong and durable growth, according to Krishna Srinivasan, Director of the Asia and Pacific Department at the International Monetary Fund (IMF). Srinivasan emphasized that while India's economic outlook remains robust, sustained efforts are crucial for long-term stability.
Key Areas for Reform
Srinivasan highlighted several critical areas requiring attention. These include comprehensive factor market reforms, particularly in land and labor. He noted that while some progress has been made, significant hurdles remain, especially concerning land access for foreign direct investment (FDI).
- Labour market reforms: Addressing long-standing issues to enhance flexibility and productivity.
- Land reforms: Improving accessibility and streamlining processes for investments.
- Business climate: Implementing measures to create a more attractive environment for both domestic and international investors.
- Trade liberalization: Reducing existing tariff and non-tariff barriers to foster greater international trade and competitiveness.
“India needs to create the environment that can support a lot of foreign investment,” Srinivasan stated, stressing that these integrated measures are vital to anchor sustained economic expansion.
Growth Projections and Global Standing
The IMF projects India's economy to grow by 7% in both FY27 and FY28, an upward revision from its earlier forecast. This trajectory positions India to overtake Japan as the world's fourth-largest economy by 2027. However, Srinivasan cautioned that this growth must be accompanied by a focus on generating meaningful employment and investing in education and skills development to benefit the wider population.
Persistent Downside Risks
Despite the optimistic growth outlook, several downside risks could impact India’s economic stability. Srinivasan pointed to the potential for prolonged energy price shocks, tighter monetary policies in response to rising inflation, adjustments in the artificial intelligence (AI) cycle, and the significant impact of El Niño weather patterns on growth.
The IMF’s Regional Economic Outlook for Asia and the Pacific also identified broader regional challenges, including the energy shock from West Asia conflicts, the AI-driven technology boom, and ongoing trade reconfiguration. While the Asia-Pacific region has demonstrated resilience, the effects remain uneven, with tech-related sectors often benefiting more than others.
“The region overall has shown resilience so far. However, the effects are uneven across the region, and even within economies, where tech-related sectors are benefiting more than other parts of the economy,” the report noted.
Srinivasan concluded by stressing the importance of continued coordination between central and state governments to address these multifaceted challenges effectively and ensure India fires on all cylinders for comprehensive development.