Asia needs to take a leadership role in the global economy that reflects the continent’s growing clout, International Monetary Fund Managing Director Christine Lagarde said.
Lagarde, addressing a conference on 'Advancing Asia: Investing for the Future' Saturday in New Delhi, said that Asian officials should keep monetary policy supportive, while using fiscal policy to boost growth and macro-prudential measures to protect financial stability, news outlets reported.
Adopting structural reforms to boost competitiveness, growth and jobs will be key, she said.
Appreciating continuing reform process in India, she said, "India's star shines bright" amid global economic challenges and can deliver nearly two-thirds of the worldwide growth over the next four years despite a slowing momentum.
The world's fastest-growing large economy, she said, is on the verge of having the largest and youngest-ever workforce and, in a decade, set to become the world's most populous country.
"So, India stands at a crucial moment in its history—with an unprecedented opportunity for transformation. Important reforms are already under way," she said.
"Think, for example, of Make-in-India and Digital India. And with the promise of even more reforms to come, India's star shines bright."
Lagarde said Asia is the world's most dynamic region and today accounts for 40% of the global economy.
Global Challenges
Lagarde, who got reelected for the second term as chief of the Washington-headquartered IMF, pointed to the global economy facing many challenges.
These challenges, she said, include volatile markets and capital flows, economic transitions and financial tightening in many countries, the large drop in commodity prices, including oil and escalated geo-political tension.
The call comes as policymakers the world over are struggling to revive their economies, which have been buffeted by slowing productivity and high debt. "Indeed, the global economy faces many challenges: volatile markets and capital flows; economic transitions and financial tightening in many countries; the large drop in commodity prices, including oil; and escalated geopolitical tensions," she said.
Lagarde urged the following measures in specific countries:
China should improve the “allocation of credit to help rebalance the economy away from debt-led investment.”
Japan should reform its labor markets and corporate governance, and deregulate its product markets.
India, which is at a “crucial moment in its history,” needs to improve the efficiency of its product markets, encourage private investment and boost infrastructure.
Rapid Growth
Prime Minister Narendra Modi for his part said that India’s growth rate of over 7% was being achieved. He said India dispelled the myth that democracy and rapid economic growth could not go together.
India’s rapid economic growth, he said, was also very distinct in Asia, as the country had never tried to gain in trade at the expense of partners, never undervalued its exchange rate; it rather added to the world and Asian demand by running current account deficits.
Amid global problems, Modi said, India was a haven of macro-economic stability. In a difficult external environment and despite a second successive year of weak rainfall, “we have increased our growth rate to 7.6%, the highest among major economies in the world... We have improved our economic governance... Corruption and interference in the decisions of banks and regulators are now behind us.”
Sign MoU
India and the IMF also announced the signing of a Memorandum of Understanding for establishing the South Asia Regional Training and Technical Assistance Center. It is expected to become the focal point for planning, coordinating, and implementing the IMF’s capacity-development activities in the region. This will include macroeconomic and fiscal management, monetary operations, financial sector regulation and supervision, and macroeconomic statistics.
The centre will help to address the existing training needs and respond to the demand for IMF training in India, Bangladesh, Bhutan, Maldives, Nepal, and Sri Lanka, while bringing the region’s training volume on a par with those of other regions.
