IANS | 17 Apr, 2024
Multilateral institutions such as the IMF and UNCTAD view India as a
potential driver of global economic growth going ahead, as the country
has become the fastest-growing emerging economy while China’s GDP growth
has been pegged at 4.6 per cent in 2024 and expected to slow down
further to 4.1 per cent in 2025.
The IMF’s World Economic Outlook
report, released on Tuesday, has not only raised India's growth forecast
by 0.3 percentage points to 6.8 per cent for 2024-25 but also sees the
country as a bright spot "supporting global growth over the medium term
and spill over to other countries".
With China having fallen
behind after the crash in its real estate sector and US sanctions
triggering an economic slowdown, the IMF report views India and other
G20 large emerging market countries such as Brazil playing a bigger role
in the global trading system and pushing global growth going ahead.
The
IMF report also vindicates India’s economic policy as it attributes the
robust growth rate to a "strong domestic demand", which has been
created by a huge increase in government expenditure on large
infrastructure projects such as highways, railways, ports and power
plants along with a revival in rural demand.
Stepped-up
allocations for agriculture, rural employment schemes such as MNREGA and
special programmes for women self-help groups have helped to bolster
rural demand and create a larger market for industrial products.
During
the 10-year tenure of Prime Minister Narendra Modi’s government, over
90,000 kilometres of national highways have been built which is almost
twice that constructed in the preceding 10 years, according to official
figures.
Government investment in highway infrastructure shot up
more than four-fold to a staggering Rs 2.4 lakh crore in 2022-23 from Rs
51,000 crore in 2013-14.
The latest UNCTAD (UN Conference on
Trade and Development) report, released on Tuesday, forecasts global
economic growth at 2.6 per cent in 2024, barely above the 2.5 per cent
threshold commonly associated with a recessionary phase.
However,
amid the gloomy global scenario, it states that India’s economy is
buoyed by strong public investment and service sector growth, with a
forecasted expansion of 6.5 per cent in 2024.
India is expected to
maintain its rapid pace of road construction with the addition of up to
13,000 kilometres in 2024-25, an increase of 5 to 8 per cent over the
previous year, according to a report released by rating agency ICRA on
Tuesday.
"The pace of execution in this fiscal will be supported
by a healthy pipeline of projects at above 45,000 km as of March 2024,
increased capital outlay by the government and focus on completion of
projects by the Ministry of Road Transport and Highways, " the report
states.
Government investments in big infrastructure projects
create more jobs and incomes that have a multiplier effect on the
economy as demand for products such as steel and cement also goes up,
which leads to more private investments and employment. With the
creation of more jobs demand for consumer goods also increases leading
to a further acceleration in the country’s economic growth rate.
To
ramp up the virtuous cycle of investment and job creation, the budget
for 2023-24 sharply increased the capital expenditure outlay on
infrastructure projects by 37.4 per cent to a whopping Rs 10 lakh crore
from Rs 7.28 lakh crore in 2022-23.
The interim budget, presented
by Finance Minister Nirmala Sitharaman in February has gone in for
another 11.1 per cent increase in the outlay for infrastructure projects
to Rs 11.11 lakh crore to spur growth. The increase that comes on top
of a large base of the previous year will result in massive investments
to spur growth. The Finance Minister pointed out that this will also
attract big investments from the private sector which will add to the
growth momentum.
Since the government has cut the fiscal deficit,
it will need to borrow less which will leave banks more funds to finance
the investments of private sector companies to accelerate growth and
create more jobs.