India ‘easily’ the fastest growing economy, IMF executive director says, as GDP growth blows past estimates

IMF Executive Director and former Chief Economic Advisor of India, Dr Krishnamurthy V. Subramanian addresses a press conference.

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India is ‘easily’ the fastest growing economy in the world, IMF executive director Krishnamurthy Subramanian said, as the country’s third-quarter GDP growth blew past analysts’ estimates.

At 8.4%, India’s economy expanded at its fastest pace in six quarters, data showed late Thursday, on strong private consumption and upbeat manufacturing and construction activity. Reuters estimates had pegged growth in the October to December period at 6.6%.

“If you look at the GDP numbers … India’s poised for about 8% growth this year,” Subramanian, who is also a former chief economic advisor to the Indian government told CNBC’s “Squawk Box Asia” on Friday.

The Indian government also raised its GDP growth outlook for fiscal year 2023-24 to 7.6% from 7.3% forecast earlier.

Subramanian said that growth in India’s economy was driven by a shift in the government’s focus towards higher capital expenditure, which has increased significantly over the last few years.

The Indian Finance Ministry presented a fiscally prudent interim budget in early February, estimating that fiscal deficit for the financial year 2025 will narrow to 5.1% from the revised 5.8% for 2024, while emphasizing the government’s plan to boost spending on infrastructure.

The interim budget estimated that capital expenditure will rise by 11.1% to 11.11 trillion Indian rupees ($133.9 billion) in fiscal year 2025, while tax revenue for the year is expected to increase by 11.4% to 38.31 trillion rupees.

Subramanian said he expected similar fiscal prudence from the full union budget, which will be released after India’s general elections.

“I do expect the focus on capital expenditure to continue and the fiscal math also is looking very responsible,” he added.

The GDP data has boosted Prime Minister Narendra Modi’s economic record ahead of a highly anticipated national election.

“For PM Modi and BJP [Bharatiya Janata Party] who will be going to the polls in April-May, it will yet provide another boost. For RBI [Reserve Bank of India], the strong growth momentum will only reinforce their bias to stay on hold at 6.5% for the foreseeable future,” Commerzbank analysts wrote in a note.