NEW DELHI: International Monetary Fund chief Christine Lagarde hailed India as a bright spot in the otherwise gloom-ridden global economy Monday, saying the recovery from the 2008-2009 financial crisis was still fragile.
Speaking at the start of a two-day visit, Lagarde said India was bucking the trend of declining growth seen in other major economies and was on course "to become a key engine for global growth".
With the global economy expected to grow at only 3.5 percent this fiscal year and even Chinese growth decelerating, Lagarde predicted India would soon be the fastest growing major economy.
"More than six years after the global financial crisis, the recovery remains too slow, too brittle, and too lopsided," Lagarde said in a speech in New Delhi ahead of talks with Prime Minister Narendra Modi later Monday.
"We have pared down our forecasts of global growth since last October, despite the boost from cheaper oil and stronger US growth.
"And while the global economy is expected to grow by 3.5 percent this year, and 3.7 percent next year, this is still below what could have been expected after such a crisis," she told an audience of business leaders.
"In this cloudy global horizon, India is a bright spot," she added.
Since Modi came to power last May, inflation has fallen to around five percent while revised gross domestic product (GDP) data has put growth for the current financial year at 7.4 percent, meaning Asia's third largest economy is now outpacing China.
A fall in global crude prices has also been a major boon to a country that is one of the world's biggest oil importers.
Lagarde welcomed the government's first full budget last month for striking "a good growth-equity balance" and praised Modi's drive to make India a major manufacturing hub and an easier place to do business.
But she also stressed that the government needed to do more to allow "an open and competitive business environment to flourish", saying up to $1 trillion in infrastructure investment was required over the medium-term.
While Modi has pledged to streamline bureaucracy, Lagarde said that too many projects were still being stalled by red tape.
"Much needs to be done in easing land acquisition, expediting clearances, and establishing a stable regulatory regime so that the private sector can invest," she said.
"These issues are on the radar of policymakers, which is promising, they must be on the action list."
Lagarde is paying a two-day visit to India, her first since Modi's right-wing Bharatiya Janata Party (BJP) ousted the centre-left Congress party last May after a marathon general election.
As well as her talks with top officials and the keynote speech in Delhi, she will travel to the financial capital Mumbai for other meetings on Tuesday.
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