India bright spot in weakening global recovery: IMF

Christine Lagarde said weak economy can deter higher living standards, fresh employment levels, controlling debt of nations

The International Monetary Fund (IMF) has said India remains a bright spot, even as global economic revovery has weakened and risks to global financial stability have increased, all of which call for a combination of monetary, fiscal, and structural actions.

"India remains a particular bright spot with rising real incomes and confidence boosting domestic demand," IMF Managing Director Christine Lagarde said in her global policy agenda, just ahead of the Spring Meeting of the Fund and the World Bank.

"Global economy is expanding moderately, but the outlook has weakened further since October and risks have increased," she said, adding this may well prove to be a deterrent to higher living standards, fresh employment levels and controlling debt of nations.

The IMF chief said there could emerge some indirect ramifications from factors like geopolitical shocks from conflicts, terrorism, refugee flows, a potential exit of Britain from the European Union and global epidemics.

At the same time, there were some positives also, she stressed.

"Some recent improvement in data releases, somewhat firmer oil prices, reduced pressures on outflows from China, and actions by major central banks have all contributed to improving sentiment," said Lagarde, but felt these needed to be built upon.

"A three-pronged approach with monetary, fiscal, and structural actions can work as a virtuous trinity, lifting actual and potential growth, averting recession risks, and enhancing financial stability."

Among the various policy prescriptions, Lagarde said more needs to be done to support efficient infrastructure investment in all countries and that a new infrastructure policy initiative will be piloted this year to scale up spending in this area and improve institutional capacity.

This apart, she said, the Fund will also assess the size and implications of the problem, and examine options to reduce the risk of adverse balance sheet effects from the rising private sector indebtedness, and unresolved crisis legacies in banks.