India is better positioned to cope with external financial shocks than most emerging market economies, International Monetary Fund head Christine Lagarde was quoted saying on Monday, just ahead of a of a crunch meeting of the U.S. Federal Reserve.
The Fed, at its meeting ending Wednesday, is expected to signal an increase in its ultra-low interest rates by as soon as June, potentially triggering capital outflows from emerging markets that have been flooded with cheap dollars.
In Sept. 2013, Ben Bernanke, then chairman of the U.S. Federal Reserve, caused a heavy selloff in the Indian rupee, bonds and stocks when he announced the Fed was to scale back its $80 billion a month quantitative easing programme.
Now, Lagarde said in an interview with a national daily before a two-day visit, India is in better shape.
“India has prepared better than most emerging market economies for any such external shocks,” Lagarde said, adding that India had shrunk its current account deficit and boosted its stock of international reserves.
Lagarde was due to give a speech in New Delhi on Monday and will meet officials from the Reserve Bank of India in Mumbai on Tuesday.
Last week, the IMF said in an annual report that India’s economy is recovering. But growth, which it forecast at 7.5 percent in the fiscal year starting April 1, would fall just below government expectations.