Just as many countries around the world are grappling with low growth, India has been marching in the opposite direction, says Christine Lagarde, MD of the IMF
As India “grows and takes its rightful place in the global economy, the focus should remain on sound policies and inclusive institutions. A sound, growth-friendly revenue and expenditure framework anchored in an explicit medium-term consolidation path is critical. The recently approved Budget is a step in the right direction and contains several promising elements” believes Christine Lagarde, Managing Director of the International Monetary Fund (IMF).
Lagarde who is in India, while speaking at a function at Sri Ram College in New Delhi yesterday said “"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. How about monetary policy? Here too, a sound monetary policy framework to keep inflation under control and ensure financial stability is essential," she added.
She said that a sound and healthy financial sector was essential to support strong and sustainable growth and this required banks, including public sector banks, with strong balance sheets. As the fiscal deficit continues to shrink, Indian banks can reorient their balance sheets away from holding government securities toward more lending to the private sector for investment and growth, she suggested.
Terming India a bright spot in the "cloudy" global economy, IMF Managing Director Christine Lagarde today said the country will clock 7.2% growth in the current fiscal and its GDP will exceed combined total of Japan and Germany by 2019. "In this cloudy global horizon, India is a bright spot. Recent policy reforms and improved business confidence have provided a booster shot to economic activity," she said On introduction of new series of national accounts with base year 2011-12, she said, "Using India's new GDP series, the IMF expects growth to pick up to 7.2% this fiscal year and accelerate further to 7.5% next year -— making India the fastest growing large economy in the world." The IMF chief further said, "Indeed, a brighter future is being forged right before your eyes. By 2019, the economy will more than double in size compared to 2009."
When adjusting for differences in purchasing prices between economies, India's GDP will exceed that of Japan and Germany combined, she said adding it will also exceed the combined output of the three next largest emerging market economies - Russia, Brazil, and Indonesia.Lagarde further said, "Just as many countries around the world are grappling with low growth, India has been marching in the opposite direction." India's growth rate this year is expected to exceed that of China, she said, adding the country will also become the most populous in the world by 2030. The IMF chief believes that the conditions are ripe for India to reap the demographic dividend and become a key engine for global growth as it (the country) is on the verge of a new chapter, filled with immense promise.
On world economy, she said, "More than six years after the global financial crisis, the recovery remains too slow, too brittle, and too lopsided. We have pared down our forecasts of global growth since last October, despite the boost from cheaper oil and stronger US growth." While the global economy is expected to grow by 3.5% this year, and 3.7% next year, this is still below what could have been expected after such a crisis, she added.