India is the bright spot on the “cloudy global horizon” and Asia's third-largest economy should “seize the moment” by focussing on further reforms, says IMF chief Christine Lagarde.
“Recent policy reforms and improved business confidence have provided a booster shot to economic activity,” the head of the International Monetary Fund said at a lecture at Lady Sri Ram College in the Capital.
Using India’s new GDP series, the IMF now expects growth to pick up to 7.2 per cent this fiscal year and accelerate to 7.5 per cent next year.
Lagarde said the country was now the fastest-growing large economy in the world. By 2019, the Indian economy would more than double in size compared with 2009, she said.
“When adjusting for differences in purchasing prices between economies, India’s GDP will exceed that of Japan and Germany combined. Indian output will also exceed the combined output of the three next largest emerging market economies — Russia, Brazil and Indonesia,” Lagarde said.
Subsidy reforms needed To make the Indian economy resilient, nimble and more supportive of growth, the fiscal policy should focus on further reform of the subsidy regime and implementation of the Goods and Services Tax, she said.
On the monetary policy front, Lagarde said India’s recent adoption of flexible inflation targeting was welcome.
She said India was well prepared to handle any rate hike by the US Fed in the coming days.
She, however, warned that global financial market volatility arising from any monetary policy normalisation can hit India. “India is well prepared and fundamentally strong (to cope with the normalisation),” Lagarde said replying to a question on the likely effect of any US interest rate hike.
She, however, made it clear that it was for the US Federal Reserve Chairperson Janet Yellen to take a “final call” on the timing of the interest rate hike.
Seeks clarifications on new GDP series
The International Monetary Fund has sought certain clarifications from the Indian authorities on the new GDP series even as it is confident about its veracity, IMF Managing Director Christine Lagarde said.
“We are fairly confident about the data. We have accepted the new GDP series conditionally.
“I think the new GDP growth projections are very much on the horizon,” Lagarde said.
The IMF chief was replying to a query on whether the IMF accepted the recent GDP growth forecasts made by the Central Statistics Office post the introduction of a new series of national accounts with a new base year of 2011-12.