India better positioned to absorb financial shocks: IMF’s Lagarde

India is one of the most dynamic economies in the world, and better positioned to cope with external financial shocks than most emerging market economies, International Monetary Fund head Christine Lagarde said on Monday, just ahead of a two-day visit to the country.

Managing Director of the International Monetary Fund Christine Lagarde

But she also added that the country must implement the planned reforms and open up more fully to the world to realise its potential.

Her comments come ahead of a crunch meeting of the US Federal Reserve.

The Fed, at its meeting ending Wednesday, is expected to signal an increase in its ultra-low interest rates by June, potentially triggering capital outflows from emerging markets that have been flooded with cheap dollars.

In September 2013, Ben Bernanke, then chairman of the US Federal Reserve, caused a heavy sell off in the Indian rupee, bonds and stocks when he announced the Fed was to scale back its $80 billion a month quantitative easing programme.

Now, Lagarde said in an interview with The Times of India, India is in better shape.

"India has prepared better than most emerging-market economies for any such external shocks," Lagarde said, adding that India had shrunk its current account deficit and boosted its stock of international reserves.

Lagarde was due to give a speech in New Delhi on Monday and will meet officials from the Reserve Bank of India in Mumbai on Tuesday.

Last week, the IMF said in an annual report that India's economy is recovering. But growth, which it forecast at 7.5 per cent in the fiscal year starting 1 April, would fall just below government expectations.