IMF Chief Praises India's Bold Economic Reforms as Key Global Growth Engine Amid International Challenges

IMF chief Kristalina Georgieva with Prime Minister Narendra Modi and President Droupadi Murmu (File).

International Monetary Fund chief Kristalina Georgieva lauded India's ambitious economic reforms during the IMF's semi-annual gathering of finance ministers and central bank governors. "I'm very big on India because of the boldness of their reforms. For example, everyone told India that digital identity on a mass scale could not be done... but India proved them wrong," she stated on Monday.

The IMF chief highlighted India's comprehensive reforms, including the revised direct and indirect tax systems, the widespread implementation of digital payment infrastructure, and the successful development and integration of Aadhaar, the country's digital social identity program.

Among the significant reforms Georgieva referenced was September's recalibration of Goods and Services Tax brackets. The government approved major changes, eliminating the 12 percent and 28 percent slabs while introducing a 40 percent 'sin tax'. These adjustments aimed to stimulate domestic consumption by reducing prices on everyday essentials like ghee, milk, paneer, butter, coffee, and roti.

The government has additionally modernized income tax brackets and comprehensively reformed tax legislation.

Georgieva's recent praise builds upon her positive assessment from last week, when she described India's economy as a 'key growth engine' in a global economy still recovering from pandemic effects. She noted that global growth forecasts hover around three percent over the medium term, down from 3.7 percent pre-pandemic, adding that "global growth patterns have been changing... with China decelerating steadily while India develops into a key growth engine."

According to July data, the IMF predicts 6.5 percent growth for India in 2025 and 2026. The Reserve Bank of India maintains a more optimistic outlook, with RBI Governor Sanjay Malhotra raising projections to 6.8 percent based on growth-inducing structural reforms, including the streamlined GST structure.

While India's economic performance received special recognition, the IMF chief expressed concerns about the G20's approach to persistent debt challenges affecting developing economies. "Growth is slow, debt is high and the risks of financial downturn are... there," she remarked, noting that the IMF continues collaborating with the World Bank to address countries experiencing liquidity issues.

Georgieva warned last week that global public debt is expected to exceed 100 percent of GDP by 2029. The immediate concern is that approximately 150 developing nations are either unable to service their debt obligations or rapidly approaching that critical threshold.

She emphasized the IMF's ongoing work with the World Bank to assist countries facing severe liquidity challenges, while attempting to keep debt issues prominent on the G20 agenda. These comments are particularly significant as South Africa, the current G20 chair, has prioritized debt sustainability. However, the United States, the incoming chair under President Donald Trump, has not indicated strong interest in this area.

Georgieva also highlighted potential uncertainties in the global economy for 2025, particularly regarding the impact of U.S. trade tariffs, against the backdrop of renewed U.S.-China trade tensions. China recently unveiled new export restrictions on critical minerals, prompting President Trump to threaten "100 percent tariffs," potentially triggering a full-scale trade war.

Such escalation would undermine the carefully negotiated truce between Washington and Beijing that had reduced tariffs from triple-digit levels and led the IMF to upgrade its global growth outlook. Former and current IMF officials have called for "sanity" to prevail in this situation, with Martin Muehleisen, a former IMF strategist, warning, "If Trump goes back to 100% tariffs on Chinese goods, there's going to be a lot of pain in the markets for him."