The global economy needs a new momentum and a bold policies agenda to avoid a “new mediocre” period of low and uneven growth as it continues to struggle with a disappointing recovery six years after the Lehman Brothers’ collapse triggered a financial crisis, International Monetary Fund (IMF) Managing Director Christine Lagarde said here on Thursday.
Ms. Lagarde said the IMF was recommending country-specific infrastructure investments and structural reforms, including those for labour markets in emerging market economies such as India, as the imperatives for raising growth.
It was a question of getting on with the job and doing it and not just talking about building infrastructure to push growth, Ms. Lagarde said at a press conference at the onset of the IMF’s annual meeting of members here. Finance Secretary Arvind Mayaram is leading the Indian delegation to the meeting as Union Finance Minister Arun Jaitley is recovering from a surgery. On India, Ms. Lagarde said India’s growth was better than expected.
Earlier this month, Ms. Lagarde had in a speech at Georgetown University here said: “The global economy is at an inflection point: it can muddle along with sub-par growth — a ‘new mediocre’ — or it can aim for a better path where bold policies would accelerate growth, increase employment, and achieve a ‘new momentum.’”
The IMF released on Thursday its Managing Director’s Global Policy Agenda that lists India as a country for which alongside measures to increase investment, particularly in infrastructure for eliminating bottlenecks, labour market reforms should be a priority in its quest for higher growth. The Agenda also recommends addressing education gaps, encouraging innovation and fostering financial inclusion as other reform priorities for emerging markets such as India. Further, it points out the binding constraint of the low fiscal buffer available for expansion of much-needed social services as revenue is low and there is a need for broadening the tax base and improving tax administration.
In a blow to India’s current efforts at reviving the World Trade Organisation talks at Geneva, the Agenda said: “With even the relatively narrow WTO Bali agreement now in limbo, the redoubling of joint efforts is needed to avoid fragmenting global trade.”
The WTO’s Bali deal that proposed a way of finding permanent solutions to the problem of minimum support prices (MSPs) to farmers breaching its permissible limits while granting them protection in the interim and at the same time a Trade Facilitation Agreement (TFA) has gone cold following India’s refusal to ratify a protocol. India in July this year refused to ratify the TFA protocol until the time the WTO makes “satisfactory” progress on laying down the road map for finding the permanent solution to the issue of its MSPs in danger of breaching the permissible limits.
The 2010 governance and quotas reforms of the IMF are stuck as the U.S. Congress is yet to ratify the Obama Administration’s proposal. She hoped that the different branches of the U.S. authorities — the executive and legislative — would understand the importance of the IMF’s need to be representative of global economy and including at the table the people that should be there. “The role of the IMF warrants that they ratify the reforms,” she said. The reforms would lead to a slight reduction in the U.S. voting quota at the IMF while increasing that of countries such as China.
