India needs stronger investment, quality jobs to sustain 6.8% growth potential, says IMF

India will need higher productivity growth, stronger private investment and faster creation of high-quality jobs to realise its medium-term potential growth rate of 6.8 per cent, the International Monetary Fund (IMF) said on Thursday, while describing the country as a key engine of global economic expansion.

The IMF, in its October World Economic Outlook, had upgraded India's medium-term potential growth estimate to 6.8 per cent from its earlier projection of 6.5 per cent, reflecting confidence in the country's economic fundamentals and structural reform momentum.

IMF Communications Director Julie Kozack said the upward revision took into account several favourable factors, including India's demographic advantages, its large and expanding domestic market and progress on economic reforms.

However, she emphasised that sustaining stronger growth would require continued policy efforts to improve productivity, encourage private investment and generate better employment opportunities.

𝐏𝐫𝐨𝐝𝐮𝐜𝐭𝐢𝐯𝐢𝐭𝐲 𝐠𝐫𝐨𝐰𝐭𝐡 𝐜𝐫𝐮𝐜𝐢𝐚𝐥

"But in general, like in many countries, we are encouraging India to take continuing reforms, particularly to focus on how productivity growth can be increased," Kozack told reporters in response to a question from PTI.

She said improving productivity would be essential for India to fully realise its medium-term growth potential.

The IMF official identified stronger private sector investment and accelerated creation of high-quality jobs as two other important requirements for sustaining economic expansion.

The emphasis on employment quality reflects the need to translate economic growth into productive opportunities for India's expanding workforce.

Kozack said these issues would be discussed during the IMF's forthcoming Article IV consultations with India, the Fund's regular assessment of member countries' economic performance and policies.

𝐆𝐫𝐨𝐰𝐭𝐡 𝐟𝐨𝐫𝐞𝐜𝐚𝐬𝐭𝐬 𝐫𝐚𝐢𝐬𝐞𝐝

The IMF had last month revised India's economic growth projections upwards for both financial years 2026-27 and 2027-28.

It raised the growth forecast for FY27 to 7 per cent from the 6.4 per cent projected in July.

Similarly, the projection for FY28 was increased to 7 per cent from the earlier estimate of 6.7 per cent.

The upward revisions indicated the Fund's improved assessment of India's near-term economic outlook.

The IMF's medium-term potential growth estimate of 6.8 per cent represents its assessment of the economy's sustainable growth capacity, while the 7 per cent forecasts refer to expected growth in the specified financial years.

𝐃𝐨𝐦𝐞𝐬𝐭𝐢𝐜 𝐝𝐞𝐦𝐚𝐧𝐝 𝐬𝐮𝐩𝐩𝐨𝐫𝐭𝐬 𝐨𝐮𝐭𝐥𝐨𝐨𝐤

Kozack said India's favourable demographics and growing domestic market remained important strengths supporting its economic prospects.

A large consumer base and expanding demand for goods and services provide opportunities for businesses to increase production and investment.

The IMF also recognised the contribution of structural reforms to improving the economy's medium-term prospects.

Nevertheless, the Fund maintained that additional reforms would be necessary to raise productivity and strengthen the investment environment.

Greater private investment would be particularly important for expanding productive capacity and supporting sustained employment generation.

𝐈𝐧𝐝𝐢𝐚 𝐚 𝐠𝐫𝐨𝐰𝐭𝐡 𝐞𝐧𝐠𝐢𝐧𝐞

"India does remain a key growth engine for the world. The economy has strong fundamentals and has shown considerable resilience," Kozack said.

Her remarks underscored the IMF's assessment of India's importance to global economic growth despite continuing uncertainties in the international economic environment.

The Fund's latest projections suggest that India remains well-positioned to maintain relatively strong economic expansion over the coming years.

However, the IMF stressed that achieving the country's full growth potential would depend not only on favourable demographics and domestic demand but also on sustained reforms that improve productivity, attract private capital and create high-quality employment.

The forthcoming Article IV consultations are expected to provide a more detailed assessment of these priorities and the policy measures needed to support India's medium-term economic performance.