In a remarkable surge, India has positioned itself as the fastest-growing economy globally, according to Krishnamurthy Subramanian, the Executive Director of the International Monetary Fund (IMF). The country’s third-quarter GDP growth, reported to be 8.4%, surpassed analysts’ expectations, marking the highest expansion in six quarters. This robust growth is attributed to resilient private consumption, coupled with buoyant manufacturing and construction activities.
Exceeding Projections: India’s Economic Performance
Late Thursday, data revealed that India’s economy exceeded estimations, with Reuters projecting growth at 6.6% for the October to December period. Krishnamurthy Subramanian, a former Chief Economic Advisor to the Indian government, emphasized India’s potential for approximately 8% growth for the entire year based on GDP figures. The Indian government also revised its GDP growth outlook for the fiscal year 2023-24, elevating it to 7.6% from the earlier forecast of 7.3%.
Driving Forces Behind India’s Economic Boom
Subramanian highlighted that India’s economic upswing stems from a strategic shift in the government’s focus towards higher capital expenditure. This shift witnessed over the past few years, has played a pivotal role in fostering economic growth. The Finance Ministry’s recent interim budget in February echoed this sentiment, showcasing fiscal prudence. The budget outlined plans to narrow the fiscal deficit for the financial year 2025 to 5.1%, down from the revised 5.8% for 2024. The emphasis on boosting infrastructure spending, with an estimated 11.1% rise in capital expenditure to 11.11 trillion Indian rupees ($133.9 billion) in fiscal year 2025, underscores the government’s commitment to sustaining growth.
Fiscal Responsibility and Future Projections
Subramanian anticipates a continuation of fiscal prudence in the upcoming full union budget post-India’s general elections. He expects a persistent focus on capital expenditure, emphasizing that the fiscal trajectory appears responsible. The interim budget projections indicated an 11.4% increase in tax revenue for the year, reaching 38.31 trillion rupees.
The robust GDP data has further strengthened Prime Minister Narendra Modi’s economic track record, coinciding with the approaching national elections. Analysts suggest that this stellar growth will reinforce the Reserve Bank of India’s inclination to maintain a steady course, holding interest rates at 6.5% for the foreseeable future. As India anticipates the upcoming elections in April-May, the economic momentum provides a notable boost for PM Modi and the Bharatiya Janata Party (BJP).
