International Monetary Fund chief Christine Lagarde has hailed India as a bright spot in the current global economy, as the Asian country was an engine of growth, defying sluggish business activity in major economies.
Speaking at the start of a two-day visit to India on Monday, International Monetary Fund (IMF) managing director Christine Lagarde described the current global recovery as "too slow, too brittle and too lopsided".
In a speech in New Delhi, Lagarde said that monetary policy in the world's leading economies was out of step and, even if well managed, could cause "excessive volatility" in international financial markets.
"Looking ahead, something better may yet come on the back of low oil prices and interest rates," Lagarde said in a speech to women students. "Still, there are significant risks to this fragile global recovery."
The first of those was what Lagarde called "asynchronous monetary policy" in advanced economies, with the United States and Britain set to normalize their accommodative monetary policies while the euro area and Japan would increase their stimulus.
Her warning came on the eve of a meeting of the US Federal Reserve that is expected to signal an increase in ultra-low interest rates as soon as June. Higher US interest rates, however, could trigger capital outflows from emerging markets.
Reiterating a recent IMF growth estimate, Lagarde noted that more than six years after the global financial crisis, the world economy would grow only by a modest 3.5 percent this year and 3.7 percent in 2016.
The euro area and Japan were at risk of remaining stuck with low growth and low inflation, she said, making it difficult to reduce unemployment and debts, and raising the risk of recession and deflationary pressures.
Emerging markets, meanwhile, could face a "triple hit" of a stronger US dollar, higher global interest rates and more volatile capital flows.
India standing out
The IMF chief described India as a rare bright spot on a cloudy global horizon.
Asia's third largest economy was doing better than other emerging economies, she said, with recent policy reforms and improved business confidence set to boost growth to 7.5 percent in the fiscal year that starts on April 1.
She welcomed the government's latest budget as "a step in the right direction" towards mid-term fiscal consolidation while praising plans for higher infrastructure spending.
A pact between the government and the Reserve Bank of India to formalize inflation targeting "should provide a robust institutional foundation for maintaining price stability", said Lagarde.
But to anchor long-term growth and employ a workforce that will become the world's largest by 2030, India would need to open up its labor market to women, boost financial inclusion and invest even more in infrastructure.
Lagarde, the first woman to head the Fund, cited a new IMF working paper which found that only 33 percent of women in India worked - below the global average of 50 percent and a comparable level in East Asia of 63 percent.
Not only was female participation in the labor force low, she noted, but it had been declining since 2005. Lagarde called this a "huge missed opportunity" and called for urgent remedies to make it easier for women to get regular jobs.
uhe/nz (AFP, dpa, Reuters)