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IMF sees major manufacturing shift towards India & China

The IMF's latest report highlights a global shift in manufacturing towards emerging markets like India and China, as advanced economies struggle. This transition underscores India's rise as a key player in manufacturing. The report notes a shift towards services from goods, boosting the services sector but slowing manufacturing. India's GDP growth is projected at 7% for 2024, declining due to post-pandemic demand exhaustion. Globally, GDP growth remains around 3%, with the IMF warning of prolonged weak growth and opportunities for emerging markets in manufacturing.



In its latest World Economic Outlook report, the International Monetary Fund (IMF) shines a spotlight on a notable global transformation in manufacturing production, with emerging markets such as India and China taking center stage as advanced economies face challenges in competitiveness. This shift signifies a pivotal moment where countries like India are emerging as significant players in the worldwide manufacturing arena.

 

According to the IMF, "Manufacturing production is also increasingly shifting toward emerging market economies--in particular, China and India--as advanced economies lose competitiveness." The report emphasizes a broader transition in consumer behavior from goods to services, propelling growth in the services sector within both advanced and emerging markets.

 

While this shift is driving the services sector forward, it is also causing a slowdown in manufacturing activity, prompting a rebalancing act within the global economy between these two sectors. IMF underlines this by stating, "This rebalancing is tending to boost activity in the services sector in advanced and emerging markets but is dampening manufacturing."

 

For India specifically, the IMF forecasts a GDP growth of 7 percent in 2024. The report anticipates a moderation in GDP growth in the upcoming years, with a projected decrease from 8.2 percent in 2023 to 7 percent in 2024 and further to 6.5 percent in 2025 due to the depletion of pent-up demand accumulated during the pandemic period.

 

This slowdown is attributed to the exhaustion of pent-up demand from the pandemic era as the economy stabilizes and re-establishes its growth trajectory. On a global scale, the IMF notes that the overall growth outlook has remained relatively stable since its April 2024 report, with global GDP growth hovering around 3 percent in both the short and medium term.

 

Stressing that weak growth is likely to persist beyond the current disinflation phase, the IMF suggests that the pandemic may have triggered a lasting reduction in potential growth across the global economy. The report also acknowledges the challenges advanced economies are facing while pointing out the opportunities for emerging markets like India and China to fortify their positions in the global manufacturing landscape.

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