1. IMF: India a bright spot in global economy, will clock 7.2% growth

IMF: India a bright spot in global economy, will clock 7.2% growth

India is a bright spot in a cloudy global economy, with recent policy reforms and improved business confidence boosting...

By: | New Delhi | Published: March 17, 2015 12:50 AM

India is a bright spot in a cloudy global economy, with recent policy reforms and improved business confidence boosting its economic activity, IMF managing director Christine Lagarde said on Monday. IMF, in its latest forecast last week, said it expects Asia’s third-largest economy to expand 7.2% in FY15 and 7.5% in FY16, lower than the government’s estimate, but the fastest among the world’s large economies.
On a two-day visit to India, Lagarde on Monday met finance minister Arun Jaitley and PM Narendra Modi.

Welcoming the Union Budget as “a step in the right direction”, Lagarde said India should seize the moment by taking advantage of low crude prices to adhere to a medium-term fiscal consolidation path. “Looking ahead, progress on other measures can help underpin the consolidation effort, such as further subsidy reform and implementation of the goods and services tax,” she said in a speech to students of Lady Shri Ram College in New Delhi.

Lagarde praised the government’s plan to spend more on building infrastructure, which is critical for success of ‘Make in India’ and ‘Make for India’. She said the pact between the government and RBI to formalise inflation targeting “should provide a robust institutional foundation for maintaining price stability”. Pointing to “asynchronous monetary policy” in advanced economies — normalising monetary policy in the US and UK wh-ile Japan and the euro area are increasing monetary stimulus — she said: “Even if this process is well managed, it may result in excessive volatility in financial markets, including in India.”

There are concerns that emerging and developing economies could face the triple hit of a stronger dollar, higher global interest rates, and more volatile capital flows. However, India’s fundamentals are strong and it is well prepared to deal with possible volatility in financial markets if the US Fed raises interest rates, Lagarde said.

To anchor long-term growth and employ a workforce that will grow to become the world’s largest by 2030, Lagarde said India needs to open up its labour market to women, boost financial inclusion and invest even more in infrastructure.

According to the IMF, by 2019, the Indian economy will more than double in size compared to 2009. When adjusting for differences in purchase prices between economies, India’s GDP will exceed that of Japan and Germany combined. Indian output will also exceed the combined output of the next three largest emerging market economies — Russia, Brazil, and Indonesia.

So clearly, India’s weight among emerging markets will increase. “Much of this has to do with population growth,” she said, adding that IMF is working to give India more say and shareholding in the institution.

Christine Lagarde speaks
* India’s fundamentals are strong and it is well prepared to deal with possible volatility in financial markets if US Fed raises interest rates
* The government-RBI pact to formalise inflation targeting ‘should provide a robust institutional foundation for maintaining price stability’
* India should seize the moment by taking advantage of low crude prices to adhere to a medium-term fiscal consolidation path
* India needs to open up its labour market to women, boost financial inclusion and invest even more in infrastructure
* Indian economy is poised to overtake the combined GDP of Japan and Germany in four years; IMF is working on a plan to give India more say and shareholding in the institution

  1. S
    S.Suchindranath
    Sep 7, 2015 at 11:37 am
    Not to the farmers committing suicide and the 80% of Indians who live below the Indian poverty line. India is 135th out of 172 countries in Human and Social Development and 143rd out of 172 Countries in internal peace and stability. When the IMF says "good show" it means good for the "West" which will gain a lion's share of the cake generated on the corpses of Indians. The West have always approved, for example, of India's social engineering (e.g. reservations, that gives them the world's best manpower, cheap) and have partited actively in corruption (bribery is just a tiny sliver of this), India needs to set itslef right and unlock its potential. Starting with re writing the Consution, and, this time, incorporating alien notions such as equality under law, and one law for all while defining extortion and corruption (i.e. unfitness for purpose) as treason and a capital offence rather than clifying criticism of anti-national forces as "sedition" or "contempt"
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