India today is an important engine of global growth underpinned by prudent macroeconomic policies, significant potential and opportunities out of favourable demographics, digitalisation, capital spending push, and managing the green transition, said Ranil Salgado, Senior Resident Representative for India and Bhutan, International Monetary Fund (IMF).
The country may soon become the largest contributor to global growth but the critical requirements were comprehensive structural reforms and continued macroeconomic and financial stability, he said.
Salgado was delivering the first Mimansa lecture on “India’s Growth and Prospects in an Uncertain World” at the international workshop on Complexity Economics organized by Uruppika, IIM Kozhikode’s Centre for Macroeconomics, Banking & Finance.
On the policy mix, he said fiscal policy should rebuild buffers by sustainably reducing public debt, while boosting inclusive growth.
Monetary policy should remain data dependent while seizing the opportunity to lower inflation rate to the 4 per cent target.
Financial policies should continue to promote resilience, while structural policies should harness demographic dividends while invigorating inclusive and green growth, he said, and added that labour productivity was not driving growth and, in particular, remains low in agriculture and construction.
He said global growth was at risk from trade tariffs, migration restraint and tightening of the global financial conditions.
New trade restrictions had climbed up rapidly in 2024 in Americas, Europe and Asia & Pacific were putting global growth at risk.
Discussing current complexities across globe, Mridul Saggar, IIMK faculty said that adoption of Artificial Intelligence has already set in a chain of gale of creative destruction affecting about 40 per cent of the jobs and bringing about total factor productivity enhancements that some estimates place as high as 0.68 per cent a year.
He cautioned that the new technologies could cause financial instabilities and wanted IMF to focus on weak regulation of these in advanced economies in a misplaced notion of creating national champions that is eroding consumer welfare.