‘India at the beginning of an exciting period of accelerated progress’

Among the large group of emerging economies, India currently is viewed with particular favour and optimism by international investors and businesses, according to John Lipsky, former First Deputy Managing Director of IMF.

India could be at the beginning of an exciting period of accelerated progress that could encompass many important social, economic and financial aspects, he said at the Export-Import Bank of India commencement day annual lecture.

“However, some of this current relative favour is just that, reflecting a somewhat less positive outlook than previously towards other large emerging economies and markets and, in fact, towards emerging market economies in general,” observed Lipsky, who is currently Senior Fellow at the John Hopkins University.

Viewed from a global perspective, India appears to be entering a period of powerful progress that can carry widespread and profound benefits, he added.

“But this highly encouraging outcome can’t be taken for granted. It will be realised only if the opportunities are seized, including through a combination of reforms and new investment…,” Lipsky said.

He felt it is difficult to demonstrate that the policy co-operation effort represented by the Framework Working Group in fact is having any material impact on the economic policy choices of G20 member-countries.

“To the contrary, it appears that the challenges facing the key advanced economies are rather distinct and that their policy setting is — just as would have occurred without the G-20 — much more attuned to their individual circumstances,” he added.

Lipsky pointed out that the proposed new capital and other charges and limits on banks are piling up without a completely satisfactory degree of clarity as to their overall systemic effects, for example, on the balance between traditional banking and the world of so-called “shadow banks”.

“Moreover, the original intent to make the reform process internationally consistent may not have been quite as successful as it might have been hoped.

“The result has been a tendency by many financial institutions to shrink from international commitments in a response to authorities’ understandable emphasis on financial stability concerns,” he explained.