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Source: The post is based on the article “The world economy is slowing even as India’s provides hope” published in “Live mint” on 18th October 2023.
Syllabus: GS3- Economy- economic growth
News: The IMF reports a global economic slowdown, but India is growing fast. India aims to be a developed nation by 2047, needing a 7.6% growth rate. Global slowdowns may challenge India’s growth. However, with strategies like higher savings and increased exports, India can continue its growth momentum.
What is current global economic trend?
Global Momentum Loss: The IMF has assessed that there’s a loss of global economic momentum.
Historic Low for 2028: The growth forecast by the IMF for 2028 is its lowest since 1990.
Overly Optimistic Forecasts: Historically, the IMF’s forecasting models have tended to be overly optimistic. The real global growth has been lower than IMF’s predictions made five years prior.
Private Sector Consensus: Private sector economists have also generally forecasted optimistically, mirroring the IMF’s trend.
Decade’s Trend: The global economy has been gradually slowing down since the financial crisis, and this trend is not expected to reverse in this decade.
How is India defying the economic growth trend?
Standout Growth: While most countries are experiencing a slowdown, India is a rare exception, showing strong economic momentum.
Fastest-growing Large Economy: If IMF forecasts are accurate, India could be the fastest-growing large economy for 15 years, starting from 2014.
Significant Global Contribution: The global economy will add $29 trillion between 2023 and 2028. India will contribute $2.2 trillion, making it the third-largest contributor after the US and China, each adding $5.9 trillion.
Future Acceleration: Barclays economists believe India can accelerate its growth after the 2024 elections without jeopardizing macroeconomic stability.
Foreign Policy Tool: An 8% growth rate for India is viewed as a powerful foreign policy tool, strengthening its position on the global stage.
What does India need to become developed by 2047?
Required Growth Rate: India needs to grow at a compounded rate of 7.6% annually to reach developed country status by 2047.
Challenges from the Global Slowdown: With the IMF forecasting a broad global slowdown in the next five years, India will face headwinds that could impact its economic acceleration.
Other Hurdles: Besides the global economic challenges, India needs to tackle growing protectionism tied to geopolitical situations and address potential shocks from climate change.
RBI’s Estimation: The Reserve Bank of India suggests that India’s current growth might cause inflation or stress in the balance of payments.
