India needs to emplace more and wide-ranging structural reforms in its economy to fulfill its expected role as the next engine of world growth replacing China.
The International Monetary Fund (IMF) sees India as a "long-run source of global growth" that might last longer than 30 years. For the next three decades, India is a source of growth for the global economy and could be even longer, said Ranil Salgado, IMF mission chief for India.
India also makes a significant contribution to world growth, said Salgado. He said India now contributes 15 percent of the growth in the global economy as measured by purchasing power parity (PPP), which is substantial. Only China and the U.S. contribute a larger share to the world economy, according to Salgado.
The IMF Executive Board's report of its annual consultations with India released a few days ago forecast India's growth to rise to 7.3 percent in for the fiscal year 2018-19 and 7.5 percent in the fiscal year 2019-20 due to large investment l and robust private consumption.
Salgado noted the Indian economy is recovering from the two shocks that started in late 2016: demonetization and implementation issues related to the unpopular Goods & Services Tax or GST. He said the IMF sees growth recovering despite GST. India also benefits from good macroeconomic policies; stability-oriented policies as well as some important reforms that have been done in recent years.
Salgado's continuing reference to a three-decade-long window is not without meaning, however. He pointed out that India has three decades before it hits the point where the working-age population starts to decline. He said these 30 or so years are India's window of opportunity in Asia. Only a few other Asian countries possess this demographic advantage, he said.
India has a young population, and the potential for a demographic dividend of the next three decades said, Salgado. This vast workforce must be given jobs, however.
But it takes good policies to create jobs and to create even stronger economic growth. Salgado noted India's seven to eight percent growth is very good and is one of the best in the world. But India needs even stronger growth to quickly catch up with the richer advanced countries, said Salgado.
To also attain its role as a key driver of world economic growth, India has to become a more open economy and increase its foreign trade level to that of China's. India must also take steps to ease the entry of foreign direct investments (FDIs). On the whole, however, things are looking up for India.
