New Delhi [India], October 23 : The International Monetary Fund (IMF), in its latest World Economic Outlook report, has highlighted a significant global shift in manufacturing production towards emerging markets like India and China as advanced economies lose competitiveness.
This trend indicates that emerging economies like India are becoming key players in the global manufacturing landscape.
"Manufacturing production is also increasingly shifting toward emerging market economiesin particular, China and Indiaas advanced economies lose competitiveness" said IMF in its report.
The IMF report also noted that there is also a broader shift in consumer behaviour from goods to services. This shift is fueling growth in the services sector in both advanced and emerging markets.
However, it is simultaneously leading to a slowdown in manufacturing activity. The global economy is thus witnessing a rebalancing between these two sectors.
IMF added "This rebalancing is tending to boost activity in the services sector in advanced and emerging markets but is dampening manufacturing."
For India, the IMF projects a GDP growth at 7 per cent in 2024. The IMF report stated that the GDP will moderate in the coming years. "In India, the outlook is for GDP growth to moderate from 8.2 per cent in 2023 to 7 per cent in 2024 and 6.5 per cent in 2025, because pent-up demand accumulated during the pandemic has been exhausted" the report added.
The report attributed this slowdown to the exhaustion of pent-up demand that accumulated during the pandemic, as the economy begins to stabilize and reconnect with its potential growth path.
On the global front, the IMF pointed out that there has been little change in the overall growth outlook since its April 2024 report. Following the strong post-pandemic rebound, global GDP growth has been hovering around 3 per cent in both the short and medium term.
It said "the global projection for GDP growth has been hovering at about 3 per cent, both in the short and the medium term".
The IMF cautioned that this weak growth is likely to persist, extending beyond the current disinflation period, suggesting that the pandemic may have caused a long-term reduction in potential growth across the global economy.
The report also noted the challenges faced by advanced economies while highlighting the opportunities for emerging markets like India and China to strengthen their positions in global manufacturing.
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