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IMF and India’s Economic Growth

GS-3 Mains Exam : Economy

Revision Notes

Question : “India’s economic resilience amidst global uncertainties is partly attributed to its robust public investment initiatives.” Analyze this statement in light of recent GDP growth forecasts by the IMF and the significance of public investment across various sectors in India.

Source: IMF’s Regional Economic Outlook for Asia and Pacific

Key Points:

  • IMF Raised India’s Growth Forecast: The International Monetary Fund (IMF) recently raised India’s GDP growth forecast for the financial year 2024-25 to 6.8%, up from 6.5%.
  • Reason for Upward Revision: The revision is attributed to the resilience of domestic demand, particularly driven by public investment.

Importance of Public Investment in India:

  • Crucial Role in Growth: Public investment is a key factor propelling India’s economic growth, making it the world’s fastest-growing major economy.

Types of Domestic Investments in India:

  • Public Investment: Focuses on infrastructure development, healthcare, education, agriculture, manufacturing, technology & innovation, and social welfare programs.
  • Private Investment: Further divided into household and corporate investments. Depends on factors like macroeconomic stability, savings, productivity, credit access, and balance sheet health.

Examples of Public Investment in India:

  • Infrastructure: Upgrading transportation (roads, railways, airports, ports), energy (power, transmission, renewables), water supply, and urban development (smart cities, affordable housing) to improve connectivity, reduce logistics costs, and enhance quality of life.
  • Healthcare: Increasing investments in infrastructure (hospitals), access to services (rural areas), and health insurance initiatives like Ayushman Bharat.
  • Education: Improving school & university quality, expanding access in remote areas, and enhancing skill development programs for the job market.
  • Agriculture: Targeting irrigation, crop diversification, research, and rural infrastructure to boost productivity and farmer income.
  • Manufacturing: “Make in India” initiative focuses on attracting investment, improving infrastructure, and streamlining regulations to boost domestic manufacturing.
  • Technology & Innovation: Building digital infrastructure, promoting R&D, and fostering entrepreneurship in AI, biotechnology, and clean energy.
  • Social Welfare: Poverty alleviation, social inclusion, and empowering marginalized communities through programs like NREGA, rural electrification, and subsidized food distribution.

Significance of Public Investment in India

Key Points:

  • Drives economic growth through:
    • Infrastructure development
    • Human capital development (education, healthcare, skill training)
    • Stimulating private investment
    • Regional development (reducing disparities)
    • Fostering innovation & entrepreneurship (technology parks, incubators)
  • During downturns, public investment stimulates aggregate demand and stabilizes the economy.
  • Investments in renewable energy, clean technology, and sustainable infrastructure contribute to growth and mitigate environmental risks.

Way Ahead:

  • India’s economic reforms offer investment opportunities in various sectors (renewable energy, health, ports, etc.) attracting foreign investment.
  • Initiatives like Vibrant Gujarat Summit and Production-Linked Incentive schemes show positive results.
  • Ease of doing business reforms, infrastructure development, and policy support further drive domestic investments.

About the International Monetary Fund (IMF):

  • Established in 1944 to promote global monetary cooperation, exchange rate stability, balanced trade growth, and financial stability.
  • Headquartered in Washington, D.C. with 190 member countries.
  • Acts as the global lender of last resort and a leading supporter of exchange-rate stability.
  • Publishes: World Economic Outlook, Global Financial Stability Report, Fiscal Monitor, Global Policy Agenda.



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