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New Delhi / Bloomberg
Asia needs to take a leadership role in the global economy that reflects the continent’s growing clout, International Monetary Fund Managing Director Christine Lagarde said.
Asian officials should keep monetary policy supportive, while using fiscal policy to boost growth and macro-prudential measures to protect financial stability, Lagarde said in a speech on Saturday in New Delhi. Adopting structural reforms to boost competitiveness, growth and jobs will be key, she said.
Lagarde, who was reappointed last month for a second five-year term, called Asia the “world’s most dynamic region,†noting it accounts for 40 percent of the world economy and will deliver nearly two-thirds of global growth over the next four years.
“Asia now affects the world more than ever before,†Lagarde said, according to the text of her remarks. “By the same token, Asia is now more deeply
affected by global economic
developments than ever before — and must respond to them.â€
Economic ‘Miracles’
Lagarde, 60, said Asia’s rapid integration was one of the most striking global developments of the past generation. Many countries in the continent pulled off economic “miracles,” and several became world powerhouses, she said.
Still, policy makers need to step up their response to a range of global challenges, including volatile markets and capital flows, financial tightening and low commodity prices, she said. In a speech this week in Washington, the IMF’s No. 2 official, David Lipton, warned that global growth is weakening, and called on the world to revive the “spirit of action†that followed the 2008 financial crisis.
Lagarde urged the following measures in specific countries:
China should improve the “allocation of credit to help rebalance the economy away from debt-led investment.†Japan should reform its labour markets and corporate governance, and deregulate its product markets. India, which is at a “crucial moment in its history,†needs to improve the efficiency of its product markets, encourage private investment and boost infrastructure.
Despite Asia’s growth, income inequality has increased in 15 of 22 Asian economies since 1990, Lagarde said. Broadening access to health and financial services is essential to unlocking the potential of the region’s 4.4 billion people, she said.
Policy makers should focus social spending on the neediest, and make taxes more progressive, the IMF chief said. Barriers facing women should be removed, access to infrastructure such as water and electricity should be improved, and Asian countries should pursue greater trade integration, she said, adding that Asia has a “massive stake†in combating climate change.
‘India won’t devalue currency’
New Delhi / Bloomberg
Prime Minister Narendra Modi doubled down on India’s commitment to macroeconomic stability, saying it has never devalued its currency to achieve growth and won’t resort to cash handouts as a way to boost farmer income.
With International Monetary Fund Managing Director Christine Lagarde on stage next to him, Modi said that India has “never tried to gain in trade at the expense of our partners.” He vowed to be a “good Asian and good global economic citizen” while hailing efforts to lower inflation, narrow the budget deficit and boost foreign reserves.
“Amid global problems, I am happy to say that India is a haven of macroeconomic stability and beacon of hope, dynamism and opportunity,” Modi said on Saturday at a conference in New Delhi. “We do not follow beggar-thy-neighbor macroeconomic policies.”
Modi’s remarks follow a commitment last month from Group of 20 finance chiefs to boost growth and avoid competitive devaluations. Steep losses on global stock markets and volatility in currencies at the start of the year had fueled calls for the world’s biggest economies to do more to stoke demand and bolster stability.
Investment, Not Handouts
Modi also reassured investors that his government remained committed to keeping price growth under control after pledging to double farmer incomes in a budget presentation last month. The focus on rural areas that are home to 70 percent of India’s population comes as Modi faces several key state elections that could affect his economic agenda.
“Our help to the farmers is not based on giving handouts,” Modi said. He plans to boost incomes through measures like investing in irrigation, boosting productivity, improving marketing of food and creating rural assets, he said.
“Our recent budget provides a roadmap for our future plans and ambitions,” Modi said. “Our underlying philosophy is clear — to create the climate for wealth generation, and for that wealth to be spread to all Indians, especially the poor, vulnerable farmers and disadvantaged communities.”