India is a relative “bright spot” in the global economy and continuing to implement reforms would help unlock its growth potential, a senior International Monetary Fund official said on Friday. “India today is a relative bright spot in the global economy, growing at rates well above the comparative average,” IMF Deputy Managing Director Antoinette Sayeh said at a book launch event.

Sayeh said India must leverage its existing strength in service exports and expand into job-rich manufacturing exports by deepening its participation in the global value chain and complementary structural reforms that can boost productivity, formal employment and exports.

“This would create a virtuous circle of productivity growth and strong export performance,” she said.

The IMF has forecast FY23 growth of 6.8% for India, which is expected to slow to 6.1% in FY24.

Sayeh said macroeconomic policy is responding to the significant headwinds, with fiscal measures to support vulnerable groups and monetary policy to combat persistently high inflation.

She pointed out that the country’s world-class digital public infrastructure facilitates innovation, productivity gains and access to public and financial services in India. “India is making important progress on its structural reform agenda and further implementation of the reforms would help unlock its growth potential,” she said.

Speaking separately to the media, she said the country needs to be more ambitious on the revenue side and look at simplifying goods and services taxes and personal income tax and show a clearer path to fiscal consolidation.

The IMF, in its Article IV Consultative Report released last month, warned that India’s fiscal space was at risk and called for more ambitious and well-communicated consolidation to ensure medium-term fiscal sustainability.

Sayeh said at the event that by reducing tariffs and non-tariff barriers on both goods and high-value services such as professional services, trade and investment reforms will be crucial to boosting competitiveness and building regional supply chains to benefit South Asia.

She said disruptions in key industries in the rest of Asia present opportunities for South Asia as global value chains realign.

In order to benefit from these developments, however, the region must create the necessary structural conditions through further liberalization and regulatory reforms.

She also warned of geoeconomic fragmentation. “We see that the number of trade restrictions is increasing and the sectoral composition of trade restrictions has shifted…Asia has benefited a lot from openness and integration and we hope for strong international cooperation to avoid fragmentation.”

Sayeh said extreme poverty in Bangladesh, Bhutan, India, the Maldives, Nepal and Sri Lanka has fallen from 500 million to fewer than 250 million people over the past two decades, but now poverty alleviation is no longer a matter of course and is instead the result of political decisions.