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International Monetary Fund (IMF) chief Christine Lagarde on Monday advised India to expedite project clearances, establish a stable regulatory regime and ease land acquisition norms to facilitate private sector investment.
And, to resolve issues in public-private partnership (PPP) projects, many stuck due to red tape and regulatory uncertainty.
Delivering a lecture at Lady Shri Ram College here, she said the United States was not ratifying quota reforms in the IMF, due to which the plan to increase the voice of India and other emerging countries in the Fund were being held up. However, the IMF was working on other ways to implement the programme, she said during her lecture on ‘Seizing India’s moment’.
Terming India a “bright spot”on a cloudy global horizon, Lagarde said the country's economic growth rate was expected to overtake China’s this year and it would be a bigger economy than Japan and Germany combined by 2019, adjusting for purchasing power parity.
However, she put economic growth in India at 7.2 per cent this financial year and 7.5 per cent for the next one, both less than the official estimate of 7.4 per cent and 8.1-8.5 per cent, respectively. The Fund estimates the size of India's economy by 2019 to be twice that in 2009.
However, this growth is not quite inclusive, as the female labour force participation rate is now 33 per cent, much lower than the global average of 50 per cent and well below East Asia’s average of 63 per cent, she said. Also, female participation has been declining since 2005. Lagarde called this a “huge missed opportunity” and urged for quick remedies.
Advising coordinated action by central bankers on monetary policy, she refused to say when the US Federal Reserve was expected to raise interest rates. Beside uneven monetary stances that could unleash volatility in capital flows, the current low oil prices could be there for the next 18 months, beyond which there will be uncertainty, she said.
Low crude oil prices give India a chance to trim subsidies, she said.
‘Make in India’ and ‘Make for India’ were very laudable objectives. “However, they require an open and competitive business environment to flourish, and reliable and affordable sources of energy, transportation, and communication,” the IMF head said.
She said India’s infrastructure needs are immense and noted estimates that an additional $1 trillion in such investment was required over the medium term. “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 issues on PPP in infrastructure was critical, she said. “Many of these projects are delayed due to regulatory uncertainty and bureaucratic hold-ups.”
To a query on when an Indian can become head of the Fund, she said, “I hope one of these days. One day, of course.”
Adding: “We need to (bring comprehensive) reforms...so that economies are represented in a fair manner.”
IMF reviews members’ quotas once every five years and the previous one was in December 2010. India has already consented to a quota increase under the review.
Once the review takes effect, India’s share will increase from the current 2.44 per cent to 2.75 per cent, following which the country will become the eighth largest quota holder at the IMF, up from the 11th position.
During the day, Lagarde also met President Pranab Mukherjee, Prime Minister Narendra Modi and Finance Minister Arun Jaitley. The finance minister called for early implementations of the quota reforms.
| LAGARDE ON INDIA |
| “Giving girls a level playing field is not just morally right, it also makes economic sense. Tapping the potential of women can be a game changer in many countries. India is no different” |
| “While increasing public spending on infrastructure is a step in the right direction, more needs to be done to crowd in additional private investment” |
| “Not only has India managed to find the most cost-effective way to send a mission to Mars, it also gave us yoga, ayurveda, Bollywood and chicken tikka masala! This is a special moment for India” |
