IMF Confirms India Gains from Global Supply Chain Shift

IMF sees India gaining from supply chain shift

Washington, July 9

Responding to questions at the IMF's regular press briefing, Julie Kozack, Director of the IMF's Communications Department, said the Fund is seeing clear signs that global supply chain diversification is benefiting India, although the gains have so far been concentrated in selected industries.

"We do see evidence of supply chain diversification benefiting India," Kozack added.

"The gains so far have been concentrated in some specific sectors, most visibly in electronics."

She noted that India's electronics exports "rose by 24 per cent in fiscal year 2025-26" and added that "smartphones have become one of the country's largest export products".

Kozack said the expansion in manufacturing has largely been driven by Indian companies rather than foreign investors.

"Much of this increase in production for exports appears to be happening through domestic contract manufacturers rather than foreign direct investment," she added.

Her remarks came in response to a query from IANS on whether the IMF sees international companies meaningfully diversifying manufacturing operations to India as businesses seek to reduce supply chain risks.

Kozack also reiterated the IMF's broader assessment that India remains one of the world's strongest-performing major economies.

"India is one of the fastest growing economies in the world. It remains a key engine of growth for the world," she said.

According to the IMF's latest World Economic Outlook update released on Wednesday, India's economy is projected to grow 6.4 per cent in fiscal year 2026-27, with growth expected to rise to 6.7 per cent in 2027.

The Fund also said India's risk outlook is now more balanced than it was earlier this year.

Asked whether that pace of growth would be sufficient for India to achieve its ambition of becoming a developed nation by 2047, Kozack said that sustained rapid expansion over a long period would be necessary.

"Achieving developed nation status would require India to continue to have very high, sustained high growth levels over a long period of time," she said, adding that outcomes would also depend on factors such as population growth and currency movements.

The IMF official said India has already made "significant progress in structural reforms in recent years", citing implementation of a new labour code, new trade agreements and deregulation at the state level.

To maintain its growth trajectory, she said that India should continue reforms aimed at strengthening workforce skills, increasing labour market flexibility, reducing business compliance costs and deepening trade integration.

"India would need to continue on the path of reforms," Kozack said.

"We encourage India to build on this progress."

India has increasingly positioned itself as an alternative manufacturing destination as global companies diversify production beyond traditional supply chains.

Government initiatives such as the Production Linked Incentive (PLI) schemes and sustained investment in manufacturing infrastructure have helped expand domestic production in sectors including electronics, semiconductors and renewable energy equipment.

The IMF's latest assessment reinforces India's position as the world's fastest-growing major economy and comes as New Delhi continues pursuing its long-term goal of becoming a developed economy by 2047.

Economists have widely said that achieving that objective will require sustained high growth, continued productivity improvements, greater private investment and deeper integration with global supply chains.

— IANS