Upcoming elections may slow Indian economic reforms pace: IMF chief

United Nations  :  India's pace of economic reforms may slow down in the coming months because of the impending elections, although it has carried out major reforms that could help the nation reap the benefits of the upswing, said the Managing Director of the International Monetary Fund (IMF).

"We have seen and we are seeing (reforms) -- I am not sure that we will be seeing in the next few months given the elections that are coming up -- but we have seen and we are seeing major reforms that we had recommended and advocated for a long time," said Christine Lagarde at a news conference in Washington on Thursday during the Spring meetings of the IMF.

"We expect more, and whether it is in the banking sector or in other sectors actually, more reforms are expected," Lagarde added.

The Goods and Services Tax (GST) and the bankruptcy law "are good reforms and hopefully it will continue to position India in order to reap the benefit of the upswing, continue to develop its internal markets and generate this excellent growth rate of 7.4 per cent, if I recall, which is one of the highest in the emerging market economies," she said.

In its World Economic Outlook report released this week, the IMF reiterated that India was on its way to achieve growth rates of 7.4 per cent for 2018 and 7.8 per cent for 2019 -- the highest globally for major economies.

Pointing to the upward revision of the world economic growth to 3.9 per cent from 3.7 per cent, Lagarde said: "The near-term prospect for the global economy continues to be bright.

"While the sun is shining, we are seeing more clouds accumulating on the horizon," she cautioned.

Lagarde said that international cooperation in trade was at risk in a reference to the prospects of a trade war set off by the US. "This international framework is now being questioned, especially with respect to trade." 

Another risk was from global debt, which "is at an all-time high," said Lagarde. "It stands at $164 trillion, which is 225 per cent of GDP (Gross Domestic Product), of which the private sector accounts for two-thirds. Public debt in advanced economies is at levels not seen since World War II."

"Financial vulnerabilities have increased due to high debt, rising financial market volatility and elevated asset prices. A sudden tightening of financial conditions could lead to market corrections, unsustainable debt and capital flow reversals," she added.