Global markets volatility a risk for emerging economies like India

 The Dollar Business Bureau Emerging markets like India must prepare themselves for impacts from volatility in the global markets. If one follows the statements made by Christine Lagarde, Managing Director of the IMF (International Monetary Fund) in the recent past as part of her visit to India, the IMF head pointed out to the fact that the Reserve Bank of India while cutting the interest rates twice in 2015, has cautioned about possible after effects of volatility from global markets which, could pose a significant risk to the Indian monetary system. A robust financial system backed by speedy reforms will help India take advantage of favourable balance of trade equations, lower inflation, liquidity in markets and a possible higher GDP growth rate. In one of its recent reports on India, the IMF forecasted a growth of 7.2% for 2014-15 and 7.5% for 2015-16, based on the recently revised GDP methodology. The Indian economy is reviving, helped by positive policy actions that have improved confidence and by lower global oil prices, said the IMF in its annual assessment of the Indian economy To continue on this trend, India needs to revitalize the investment cycle and accelerate structural reforms, said the report and added, the Indian economy is the bright spot in the global landscape, becoming one of the fastest-growing big emerging market economies in the world. While the country is well placed to cope with external shocks, there are possible risks on the horizon, both external and domestic. Spillovers from weak global growth and potential global financial market volatility could be disruptive, including from any unexpected developments as the United States begins to raise its interest rates, concluded the report.  

This article was published on March 17, 2015.