The global economy is in better shape than three months ago even as vulnerabilities still need to be addressed, International Monetary Fund Managing Director Christine Lagarde said yesterday.

"The situation is not as grim or as dire," Lagarde said in New Delhi at a conference on the Indian and Chinese economies. "We are really away from the abyss."

Signs of stabilization in Europe as the region fights its fiscal woes, and a firming US recovery, have spurred an 11.5 percent rise in the MSCI World Index of stocks this year. At the same time, Lagarde said later at a press briefing that it shouldn't be taken the period of crisis is over, and that a sudden rise in oil prices would hurt global expansion.

"As far as India is concerned, infrastructure is the key priority," Lagarde said, along with shifting public spending toward capital investment.

Indian economic growth slowed to 6.1 percent last quarter from a year earlier, the weakest pace in almost three years. The highest borrowing costs since 2008 to fight inflation and a drop in investment have hurt growth in Asia's third-largest economy.

Lagarde reiterated that China must continue to shift toward domestic consumption as an engine of expansion.