An International Monetary Fund official stated that the continuing struggle of Europe’s economy is likely to impact other economies, such as India, just as it affected private investment.
“I think it is also clear that in India, as in other economies, demand for exports would certainly be hit, and certainly for India, we’ve already seen effects on private investment,” said IMF Director of the Asia-Pacific Department Anoop Singh. “My sense so far is that the financial effects on Asia are being contained. We are seeing Asian banks, including Indian banks, stepping in where deleveraging is taking place from European banks.”
Singh continued, explaining that like the rest of Asia, India is focused on attracting private investment. However, this needs additional infrastructure investment in order to raise potential growth.
“So in India, what is planned, for example, is to introduce certain fiscal reforms that would give more space for higher infrastructure investment in India, among other factors,” Singh explained.
According to Masahiko Takeda, also of the IMF, “Reducing the fiscal deficit will create room for private investment to grow.”
He added: “But even more important are all sorts of fiscal reform measures that the Indian government can take to improve investment and business conditions in India, so that the private sector has a bigger incentive to increase their investment. And this has been the major emphasis we have put in our recent mission in India.”