India is expected to continue its reign as the world's fastest-growing economy, but to reach its full potential and achieve the government's "Viksit Bharat" (Developed India) goal, it must "fire on all cylinders" through deeper structural reforms and trade liberalization, according to Krishna Srinivasan, Director of the International Monetary Fund's (IMF) Asia and Pacific Department.

Speaking at a recent press briefing on the Regional Economic Outlook for Asia-Pacific, Srinivasan highlighted India's strong macroeconomic fundamentals, well-managed fiscal deficit, and ongoing reforms as factors working in its favor. The IMF projects India's economy to grow at 6.6% in 2025 and 6.2% in 2026, maintaining its lead among major emerging markets despite global trade frictions. This projection is supported by a recovery in rural consumption and easing inflation, expected to decline to 4.4%.

However, Srinivasan stressed that to achieve a sustained growth rate of 8% or higher, enabling India to compete effectively with countries like China and reach its developed nation aspirations, more comprehensive reforms are needed. These reforms should focus on several key areas:

• Job Creation and Labor Reforms: Srinivasan emphasized the importance of implementing the labor codes approved in 2019-2020, which would allow for more flexible labor markets while providing social protection to workers. He also voiced concerns about the low female participation in the country's labor force and the ongoing issue of youth unemployment, noting that many workers are moving towards the low-productivity agriculture sector because the jobs being generated are not the best. Investing in education and workforce skilling is crucial to generate more jobs in the service sector.
• Trade Liberalization: Removing trade restrictions would allow productive firms to thrive and boost competitiveness. Srinivasan suggested that India should not choose between domestic self-reliance and global trade engagement, but rather balance the two. He noted that a potential trade agreement between India and the U.S. could create significant upside for growth, especially if tariffs are lowered, specifically mentioning sectors like garments, leather, gems and jewellery.
• Infrastructure Development: Improving both physical and digital infrastructure is essential. This includes focusing on agricultural and land reforms to further boost economic activity.
• Education and Healthcare: Srinivasan stressed the need for significant investments in education and healthcare to fully utilize the potential of India's expanding labor force, which is expected to add approximately 15 million people each year. Strengthening the social safety net is also a necessary reform.

Srinivasan also underlined the importance of diversifying export markets to reduce external vulnerabilities, stating that it "helps insulate the economy from shocks".

While acknowledging that "many things are working in India's favour," Srinivasan reiterated that deeper structural reforms are crucial for India to integrate more effectively into global supply chains and achieve its long-term economic goals. He urged India to focus on domestic demand, reforms, investment, innovation, and trade integration to achieve high growth. By balancing self-reliance with global trade and liberalizing trade and labor laws, India can effectively compete in the global market and sustain its growth trajectory.