Lagarde is in New Delhi today to discuss reforms that would make India a ‘global powerhouse’. She said India had the potential to become ‘the fastest growing large economy in the world’, with growth exceeding 7% this year and next.
She also predicted that the size of India’s gross domestic product would exceed that of Japan and Germany combined.
‘We know India can run—judging by your cricket record! Can it fly? I believe it can. As India grows and takes its rightful place in the global economy, the focus should remain on sound policies and inclusive institutions,’ she told members, students and guests at the Lady Sri Ram College.
‘This is where stronger economic frameworks come in—to make the economy more resilient, nimble, and ever more supportive of growth.’
Lagarde welcomed India’s first full budget announced last month, which pledged to cut tax next year in a bid to revive growth and investment.
She said the recently approved budget was ‘a step in the right direction’ and contained ‘several promising elements’, in particular increased public expenditure to upgrade India’s infrastructure.
The IMF chief said investing in infrastructure was a priority for India. ‘It means being both cyber-connected and highway-connected. I know you are all very connected on social media, but the same level of interaction is needed to connect you and other consumers to your country’s ports, shops, and factories,’ she said.
Outlining India’s ‘immense’ infrastructure needs, she said an additional $1 trillion in investment would be needed over the medium term.
Lagarde said: ‘So while increasing public spending on infrastructure is a step in the right direction, more needs to be done to crowd in additional private investment.
‘Resolving outstanding issues in public-private partnerships in infrastructure is critical in ensuring that India’s needs are addressed.’
Many infrastructure projects were delayed due to regulatory uncertainty and bureaucratic holdups, she said, adding that more needed to be done to ease land acquisition, expedite clearances, and establish a stable regulatory regime to encourage private sector investment.
But it was promising that these issues were on the ‘radar’ of policymakers, Lagarde said.
Lagarde will be in India for two-days, her first visit since Narendra Modi’s government took power last May.
