'India's growth slowdown is temporary, to achieve 6.5% growth this fiscal': Gita Gopinath at WEF Davos 2025

WEF Davos 2025: The slowdown in the Indian economy is temporary and the country will achieve 6.5% growth this fiscal, IMF Deputy Managing Director Gita Gopinath said on Tuesday.

India's economic growth slowed to near two-year low of 5.4 per cent in the July-September quarter due to poor performance of manufacturing and mining sectors as well as weak consumption.

"We see it as a temporary thing. There have been some delays in implementing some of the public infrastructure projects, but we see that picking up. We do continue to see strength in rural consumption," she said in an exclusive conversation with Rahul Kanwal, Executive Director of Business Today. "For the fiscal year as a whole, our growth number is 6.5%. So we do expect to see a recovery." 

On India-US Trade and Tariffs  

When asked about US President Donald Trump's characterisation of India as a "tariff king" and his threats of imposing tariffs on Indian goods, Gopinath said that this is going to be an environment where Washington is going to have bilateral negotiations with all their trading partners to address what they feel are "unfair trade practices". "Their (America’s) products get imposed higher tariffs than what the US imposes on products coming out of other countries,” she stated.  

Gopinath also noted that India could gain by lowering its tariffs, both in the context of global trade negotiations and its own economic development. “Our view at the IMF is that India could afford to cut back on some of its tariffs just for its own sake because this is an opportunity for India to plug itself into global supply chains. Everybody is looking to diversify, and I hear from almost everyone that India is a very attractive destination. But to be able to go in, you will need somewhat lower tariffs in India too. So that will help India directly,” she explained.  

In response to questions about India’s efforts to attract investment under its "Make in India" initiative amid competition from the US, the top economist acknowledged the strong appeal of the US as a destination for foreign direct investment. "The US is actually quite successful now in being able to attract investment into America. If you look at foreign direct investment around the world, the US is an incredibly attractive destination. It’s taking a bigger and bigger share of foreign direct investment flows,” she noted.  

However, she pointed out that India’s ability to attract investment would hinge on domestic reforms. “The best thing for India to do to offset some of that is actually to focus on the domestic reforms. In terms of what prevents people from going into India, it is about still the ease of doing business, the infrastructure, the ability to buy land or sell land, contract enforcement – those are the kinds of aspects that are more constraining factors. The more India does in terms of structural reforms at home — and it’s done a lot in terms of public infrastructure — to keep that momentum going, that will be what will change the story for India,” she shared.  

Looking ahead to India's Budget 2025, Gopinath laid out key priorities. "Firstly, it is important to continue on the path of public infrastructure investment, and implementation needs to be timely. This is not just at the central government level but at the state government level as well. There is still a big need for that,” she said.  

According to Gopinath, it is also important for the government to keep macro stability, and "it's done very well in terms of inflation". "What the RBI has done in terms of managing inflation is a really great job. On the fiscal front, India's debt levels are high. It's not an imminent concern, but that's something in terms of the budget to determine what you can do because you need to be able to raise some revenues too while you undertake the spending. Making sure that's done in a growth-friendly manner is going to be important."