Christine Lagarde, the chief of the International Monetary Fund on 2-day trip to India on Monday during which she met the country’s top leadership including Prime Minister and lauded the government’s ‘Make in India’ campaign and called the country a “bright spot” on a cloudy global horizon, saying India has the potential to double the size of its economy by 2019 compared to 2009.
“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.
Five positive things that have caught the eye of IMF chief Christine Lagarde:
1) Modi government & RBI: PM Modi, his government and (RBI) governor Raghuram Rajan are skillfully shifting the focus to good macroeconomic management, transparent government, and inclusive development. she welcomed the bold initiatives, including the move to formalize inflation targeting, the “Make in India” campaign,
2) Thumbs up to Budget: The budget for 2015-16 was a step in the right direction, according to Lagarde. “The 2015 Budget struck a good growth-equity balance. There’s emphasis on increasing the provision of public infrastructure, and within a fiscally-responsible framework. Subsidy reforms are helping, but difficult choices remain ahead as the authorities seek to create additional fiscal space for their high priority spending.
3) Fastest growing economy: The IMF expects India’s GDP (gross domestic product) growth to pick up to 7.2% in the current fiscal and accelerate to 7.5% in 2015-16 – making India the fastest growing large economy in the world. India is indeed a bright spot, and economic development holds much promise. India has an opportunity to become one of the world’s most dynamic economies. In emerging markets and developing countries, growth is projected to pick up from less than 4.5% this year to a little more next year, but it’ll vary widely across countries. Among the emerging markets, and compared to advanced economies, India is the bright spot.
4) Better prepared for external shocks: A possible interest rate hike by the US Federal Reserve could pose risks to market stability in emerging economies, including India, even if it is well managed by central banks. One cannot ignore the risks of volatility in capital flows that could emerge as the US normalizes its monetary policy stance as advanced countries ramp up quantitative easing.
5) Subsidy reforms for reducing poverty: Lagarde feels that the new government’s push toward using the Jan Dhan platform to ensure welfare payments reach intended beneficiaries is commendable. “Subsidies needed to help the poor often end up favoring the middle class. That’s why the JAM Number trinity – Jan Dhan, Aadhaar and Mobile could be a step up in terms of direct income support to the poor.