IMF chief says India better prepared to cope with external financial shocks

International Monetary Fund (IMF) Managing Director Christine Lagarde was quoted on Monday as saying that India is better positioned to cope with external financial shocks than most emerging market economies. The statement came just ahead of a of a crunch meeting of the US Federal Reserve.

The US Fed, at its monetary policy meeting ending Wednesday, is expected to signal an increase in its ultra-low interest rates by as soon as June, potentially triggering capital outflows from emerging markets, including the domestic market, that have been flooded with cheap dollars.

In September 2013, Ben Bernanke, the then chairman of the Federal Reserve, caused a heavy selloff in the Indian rupee, bonds and stocks when he announced the US central bank was to scale back its $80-billion-a-month quantitative easing programme.

Now, Lagarde said in an interview with the Times of India before a two-day visit, India is in better shape.

"India has prepared better than most emerging-market economies for any such external shocks," Lagarde said, adding that the country had shrunk its current account deficit and boosted its stock of international reserves.

The IMF chief was due to give a speech in the national capital on Monday and will meet officials from the Reserve Bank of India (RBI) in Mumbai on Tuesday.

Last week, the IMF said in an annual report that the Indian economy was recovering. But growth, which it forecast at 7.5 per cent in the coming financial year starting April 1, 2015, would fall just below government expectations.

(Reuters)