IMF chief Georgieva praises India’s role in global growth, calls it a key economic engine

International Monetary Fund (IMF) Managing Director Kristalina Georgieva has highlighted India as a key engine of world economic growth. Georgieva made the comments on Monday at the IMF-World Bank Annual Meetings in Washington, DC.

“Global growth is forecast at roughly 3% over the medium term - down from 3.7% pre-pandemic. Global growth patterns have been changing over the years, notably with China decelerating steadily while India develops into a key growth engine,” noted the IMF Chief.

Factors Driving Global Resilience

Georgieva outlined four main factors contributing to the current economic resilience observed globally:

• Improved policy fundamentals.
• The adaptability of the private sector.
• Less severe tariff outcomes than initially anticipated.
• Supportive financial conditions.

However, she cautioned that this resilience “has not yet been fully tested,” suggesting that the ease of financial conditions and rising gold demand may conceal underlying vulnerabilities.

On trade, Georgieva said: “The full effect is still to unfold. In the US, margin compression could give way to more price passthrough, raising inflation with implications for monetary policy and growth. Elsewhere, a flood of goods previously destined for the US market could trigger a second round of tariff hikes.”

Policy Recommendations

Georgieva issued a strong call for countries to pursue key reforms:

• Boost Private Sector Productivity: She urged nations to focus on reforms that strengthen institutions, protect property rights, and promote fair competition to unlock greater private sector output.
• Deepen Asian Trade: Specifically for Asian economies, she called for greater internal trade and the reduction of non-tariff barriers to ensure a boost to long-term Gross Domestic Product (GDP).
• Fiscal Consolidation: The IMF chief stressed that fiscal consolidation—reducing budget deficits—is essential for all countries, regardless of their wealth.
• “As policymakers gather next week, the most pressing questions will be about how to capture and deliver opportunity in a world of rapid change,” she said.
• “Consolidation is difficult, as many of the recent episodes of social unrest show. But if planned, communicated, and implemented well, significant deficit reduction can be delivered--especially if helped by higher medium-term growth,” said Kristalina Georgieva.
• The IMF's Annual Meetings are set to centre on strategies to maintain growth, manage increasing fiscal pressures, and address global imbalances amidst shifting international trade dynamics and technological transformations.