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The global economic recovery remains "too slow, too brittle and too lopsided", the head of the International Monetary Fund said on Monday, singling out the risk of financial market volatility arising from divergence in monetary policy among leading central banks.
Christine Lagarde reiterated the IMF's forecast that, more than six years after the global financial crisis, the world economy would grow by just 3.5% this year and 3.7% in 2016.
"This is still below what could have been expected after such a crisis," Lagarde said in a speech to women students in New Delhi.
But India's economy is a bright spot in a cloudy global economy, with recent policy reforms and improved business confidence set to boost growth, she said.
Lagarde welcomed the Indian government's latest budget as "a step in the right direction", and singled out higher infrastructure spending for praise.
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The IMF, in its latest forecast last week, said it expected India to grow by 7.5% in the 2015-16 fiscal year starting on April 1, below the government's own forecast.
A pact between the government and the Reserve Bank of India to formalise inflation targeting "should provide a robust institutional foundation for maintaining price stability", Lagarde said.
But to anchor long-term growth and employ a workforce that will grow to become the world's largest by 2030, India needs to open up its labour market to women, boost financial inclusion and invest even more in infrastructure, she said.
Lagarde cited a new IMF working paper which found that only 33% of women in India worked - below the global average of 50% and the average in East Asia of 63%. Not only is female participation in the labour force low, but it has been declining since 2005. Lagarde called this a "huge missed opportunity" and called for urgent remedies.
On global economy, she said, "Looking ahead, something better may yet come on the back of low oil prices and interest rates. 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 normalising their stances while the euro area and Japan increase their monetary stimulus.
"Even if this process is well managed, it may result in excessive volatility in financial markets, including India," Lagarde said.
She also said that the euro area and Japan were at risk of remaining stuck with low growth and low inflation, making it difficult for them to reduce unemployment, 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, Lagarde said.
