Speaking at the World Economic Forum (WEF) Annual Meeting here, Montek Singh Ahluwalia said tapering in the US indeed poses a risk for the global markets, but well-managed economies would withstand the shock.
He said India was much better prepared now to deal with the impact of US Federal Reserve tapering its monetary stimulus.
During a session on global economic outlook, Ahluwalia said there is a cautious optimistic outlook for the world economy but most of the growth was not coming from developing nations as was the case few years ago.
In China, there has been some slowdown but to a large extent a balancing was on the cards, he said.
Observing that things are different in India, Ahluwalia said the country enjoyed high growth but has slowed down for the past couple of years with growth declining from 8 per cent to 5 per cent.
"We have made it clear that slowdown in India is not only because of global crisis. RBI Governor says that one third is because of global issues and two third because of domestic factors.
"There have been issues like regulatory clearances but government realised and we have started working on those areas. Many clearances have been fast tracked. There are further reforms, including some structural reforms, in the pipeline," Ahluwalia said.
According to him, general elections are the most important thing happening in India in the next few months.
"But I don't think of elections as risk or uncertainty. If we go back in history, there have been many elections and still broad framework of reforms and policies has remained on track. I think we would grow by about 7.5 per cent," he said.
Agreeing with IMF chief Christine Lagarde that emerging economies would need structural reforms, Ahluwalia said India also needs to do the same.
During the session, Lagarde said the impact of tapering was a potential risk.
Ahluwalia said there is no doubt that tapering poses a risk to global economy.
"But my assessment is that it is well managed and there is a broad understanding that well-managed economies would manage to withstand the shock," he said.
Further, he said that when tapering talks first began, probably India was not ready, but things have changed since then.
Elaborating on the impact of monetary stimulus tapering, Lagarde said not all emerging economies have been affected in the same manner.
"What we have seen is that actual flow of capital has not been that big. Also, not all emerging markets have been affected in same way," the IMF chief said.
In the recent months, many countries have strengthened their policy frameworks and have prepared them well. "India has been a major beneficiary of its fiscal and monetary policies," she added.
During the discussion, European Central Bank chief Mario Draghi said the growth in Europe has been fragile.
Germany's Minister of Finance Wolfgang Schuble stated countries indeed need to carry out structural reforms.
"We at Germany are certainly much better today and stable and we are working on further measures that are required. It is obviously difficult for us in Europe to have one central bank for multiple countries, but we have still agreed on various measures," he said.
Bank of England Governor Mark Carney also listed out various steps being taken by the UK to revive the economy.
Talking about norms, Ahluwalia said there are areas of concern in emerging markets with respect to certain global financial market regulations.
There is concern about liquidly and is it being anticipated that banks may not be able to do enough to provide necessary financing, he added.
Bank of Japan Governor Haruhiko Kuroda said the US is recovering and Europe is finally growing. Japan is making progress and emerging economies like India and China are likely to remain either at high level or even accelerate.
"I think we can be cautiously optimistic about the global economy," he added.