India and China: Asia’s Giants Discuss Way Forward

Lagarde visits China and India to meet with political, business leaders

Asian giants try to learn lessons from each other on development

Center of global economic power shifting toward Asia

IMF Managing Director Christine Lagarde will meet with leaders from both countries during visits March 17-20. She will speak at the 2012 China Development Forum in Beijing on March 18 and will take part in the closing roundtable discussion at the New Delhi conference on ensuring strong growth in the wake of the global crisis.

While recent indicators may signal a relaxing of global economic difficulties, protracted stresses and risks—in Europe and elsewhere—pose a challenge for emerging markets in sustaining high quality growth.

Different paths

Both China and India are growing rapidly, but have taken different development paths. While China has followed a more traditional manufacturing- and export-led growth strategy, India’s growth has been driven by the services sector and reliance to a large extent on domestic demand.

Today they both face differing challenges, according to the latest IMF economic surveillance note written for the Group of Twenty industrialized and emerging market countries. “In emerging economies, the priority is to ensure a soft landing as domestic growth slows amid a deteriorating external environment and volatile capital flows,” according to the IMF note.

“There is scope to increase expenditure—including, in some cases, social spending—in economies where inflation pressure is expected to ease, fiscal positions are sound, and external surpluses are large (e.g., China). In those economies with relatively high inflation and public debt, policy space is more limited, warranting a more cautious stance toward policy easing (e.g., India).”

Sessions at the New Delhi conference will explore themes related to future development paths, financial sector reforms, and raising living standards for all by ensuring broad access to employment, quality education and health, and financial services.

Heading up

As IMF First Deputy Managing Director David Lipton underlined in a...