New Delhi: World Bank President Ajay Banga, an alumnus of the Indian Institute of Management-Ahmedabad (IIM-A), during his New Delhi visit for the G-20 Summit, remarked that he was the best example of a ‘Made in India’ product, one who never had a degree from an overseas institution.
His comments came after Prime Minister Narendra Modi, on Friday last, quoted a World Bank report that said “India has achieved financial inclusion targets in just 6 years which would otherwise have taken at least 47 long years.”
Close on the heels of these comments, International Monetary Fund (IMF)’s First Deputy Managing Director Gita Gopinath’s remarks have also brought the spotlight on the booming Indian economy: “India’s current contribution to global GDP is around 15 percent.”
This is in contrast to the US contribution of 25 percent and China’s 19 percent. Clearly, India is racing to emerge as the third-largest world economy.
She praised India’s successful G-20 presidency as a “huge deal” where a Leaders Declaration was adopted unanimously.
“Nobody expected that there would be a Leader’s Declaration. The fact that there was one is a huge deal. It tells you that even though countries can have different opinions about the way the world is headed, they can actually come together and have a declaration that I think is huge,” she added.
She also applauded the work done during India’s presidency on crypto regulation, debt issues, and multilateral development bank financing.
India will become the third-largest economy by 2027-28, based on current projections, she added, according to media reports.
Calling India an “engine of global growth,” Gopinath, however, added that there is a lot more work that needs to be done.
“The more important thing is to maintain a high growth momentum for many more years rather than in just the next four or five years. And that will require structural reforms. India is a large country. So in per capita terms, that will still be a small number even if we’re the third-largest economy. India needs to keep pushing on that front to keep the growth momentum going much more,” she said.
India’s expected growth rate for the current fiscal year (FY24) is over six percent. The two factors driving it are public investment and resilient consumption spending, she noted.
An area that India excels in vis-à-vis other countries is digital infrastructure.
“I think India is really at the forefront in this area. It has already seen the benefits, not just in innovation but also on the fiscal front, in terms of much more efficient spending, the ability to collect revenues, formalizing the economy,” she said, adding other countries are also paying attention to India’s achievements.
Gopinath stressed the need to attract private investment to increase the levels of per capita income and to get to continued high levels of growth. To enable an environment for private investment, it is imperative that the investment in public infrastructure continues.
Only four Indian states–Maharashtra, Karnataka, Gujarat, and Delhi–get a large chunk of foreign direct investment, Gopinath said, adding, “A lot has to be done at the level of other state governments also.”
Other areas that need improvement include increasing the ease of conducting business, education, and female labor force participation.
About China, she said its economy has slowed down but it has the resources to turn things around. “It still can do much more in terms of fiscal and monetary policies, and they are taking actions. But these are the things that can’t necessarily be turned around overnight.
China could still meet the target of 5 percent growth that its government set. “But in the medium term, we have China’s growth projected at around 3.4 percent. It’s not like we’re expecting to see a very deep downturn or a sharp recession, but just slowing growth.”