India a bright spot in a fragmented global economy, but must deepen trade ties: IMF MD Kristalina Georgieva

India remains one of the strongest pillars of global growth even as the world economy turns more unpredictable amid rising tariffs, uneven expansion, and the rapid advance of artificial intelligence (AI), International Monetary Fund (IMF) Managing Director Kristalina Georgieva said on Thursday.

Answering ET Online's query at an IMF press conference, Georgieva said, “India is one of the fastest growing economies. Given its size, it contributes to global growth substantially. India is where it is because it has pursued very significant reforms—tax reform, investing in infrastructure, digital infrastructure, but also roads, connectivity in the country. That has injected this growth potential.”

While commending India’s economic momentum, Georgieva said the country could benefit from closer trade integration. “India itself can aim for a higher degree of trade integration with partners. India has still maintained some barriers to trade — tariffs, restrictions,” she said.

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She pointed to shifting global trade patterns, led by major economies adopting tariff measures. “There is a significant change. The largest economy in the world has chosen to use tariffs as an instrument in relation with partners,” Georgieva said. “The rest of the world has not followed so far. Out of 191 members of IMF, we have seen only 3 moving more forcefully on tariffs — US, China and Canada. 188 countries said, thank you, but no thank you. We prefer to continue to trade on the most favored nation’s rules. And we are encouraging countries to please do that because unless you are very large, a relatively closed economy—and India is not—it is an open economy—it does not work well for you.”

Georgieva also highlighted growing regional trade integration. “We also are seeing a very interesting phenomenon, and it is the increase in regional trade integration. Actually, the ambition for regional trade integration is growing in many places—in the Gulf Cooperation Council, in ASEAN. We see it in Central Asia, more interest to trade,” she said.

'India needs to deepen trade ties'

On what India can do, she said, “One, India itself can aim for a higher degree of trade integration with partners. India has still maintained some barriers to trade. There are tariffs that India imposes. There are some restrictions. It is good to think about where do we want to go. Do we want to go in a direction of maintaining and increasing these restrictions or we want to do the other way and integrate? If I take the relations with the EU, the signal seems to be, yes, we want to trade with others. We want to have more openness.”

She also emphasized continuing domestic reforms. “The second thing India can do is just to continue doing what has worked for it—pursue reforms. There is a lot that can be done in education, increasing skills capabilities, reforming sectors to open them up for more private sector initiatives. India does have space for smart regulation to move. Self-inflicted injuries, get them out of the way. I think the strategic direction of India, look at the future sources of growth. Where is the world economy likely to go next? Demonstrably, the international solar alliance is a signal that in this thinking of that pursuit of opportunities.”

The IMF has raised India’s economic growth forecast for FY26 to 6.6% from 6.4% estimated earlier, citing strong first quarter growth that more than offset the impact of higher US tariffs on Indian goods.

On AI and world

Georgieva said the world economy is “stuck at 3% growth right now,” adding that AI could provide the next wave of productivity gains. “AI will contribute to growth, somewhere between 0.1 to 0.8%. This is significant. To extract that growth from AI, it would be very significant for the world.”

She announced the launch of the IMF’s AI Preparedness Index, designed to measure how ready countries are to leverage the technology. “Preparedness really matters, and it is happening fast. We don’t really have much time,” she said.

Georgieva also flagged growing imbalances across economies. “The global economy is excessively imbalanced,” she said, warning that diverging policy choices could deepen divides between advanced and emerging markets.

Turning to China, Georgieva said the economy has been “quite resilient to the turbulence that world has experienced,” but the IMF expects growth “to slow down to 4.2%.” “China is growing faster than the global average, and it is contributing to global growth,” she said.

Outlining Beijing’s policy challenges, she added, “Resolve real estate problems, they hold down consumer confidence. Increase social safety nets to boost consumer confidence, instead of investing in industrial policy. China has lot of opportunity to open up sectors that are currently not that market active, like services, education.”