Five Factors that Made IMF Chief Christine Lagarde Bullish on India EconomyThe IMF chief, Christine Lagarde’s being bullish on Indian economy is based on the reform initiatives undertaken by the NDA government led by the Prime Minister, Narendra Modi; targeting of inflation by the RBI governor, Raghuram Rajan, and the India’s growth potential in the backdrop of a weak global economy.

She has called Indian economy a “bright spot” over a cloudy global economic horizon as, she thought; India had the potential of doubling the size of its economy by 2019 vis-à-vis 2009. She further anticipated India’s GDP to exceed the combined GDPs of Japan and Germany, and the Indian output to exceed the combined output of Russia, Brazil, and Indonesia that are the three next largest emerging market economies of the world. During this year itself, she expected, India’s growth rate to exceed that of China. Christine Lagarde, who was on a visit to India, might have taken into consideration the following five factors while being bullish about the Indian economy.

First, the combined initiatives of PM Modi, his government, and the RBI governor Raghuram Rajan deftly focusing on good macroeconomic management, transparency in governance, and inclusiveness in development must have weighed in Lagarde’s assessment of the Indian economy.  Secondly, she herself admitted, the budget for 2015-16 has been a step in the right direction as it balances growth and equity, emphasizes increase in the provision of public infrastructure, and all these in a fiscally feasible framework. She envisioned an important role for the private sector in developing infrastructure, and India has been according due priority to it. Thirdly, India is likely to achieve the unique and proud distinction of becoming the fastest growing large economy of the world at the end of the current fiscal year as IMF expects GDP of India to grow by 7.2% in the current fiscal year and by 7.5% during 2015-16. Fourthly, India is better prepared to handle external shocks such as due to volatility in capital flows. India with its diminishing current account deficit, increasing stock of reserves, and higher growth rate expected is better prepared for economic shocks emanating from the volatility of international markets. Fifthly, providing direct benefits to the consumers of subsidies through Jan Dhan platform for several social welfare initiatives by the Indian government will alleviate poverty, and is a step in the right direction.

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