Indian growth may weaken to a decade-
low this year after investment stalled, the International
Monetary Fund said, as it called for interest rates to remain
unchanged until the nation’s high inflation rate eases.
Gross domestic product will rise 4.9 percent in 2012, less than a July forecast of 6.1 percent, the Washington-based lender said in its World Economic Outlook report today. The expansion will accelerate to 6 percent next year, it said, helped by improving overseas markets and a boost to confidence from a recent government policy revamp.
“The outlook for India is unusually uncertain,” the IMF said. “Monetary policy should stay on hold until a sustained decrease in inflation materializes.”
India’s government began the policy overhaul last month to boost the economy and avert a credit-rating downgrade, snapping months of political gridlock. The steps to curb expenditure on subsidies, contain a fiscal deficit and permit more investment from abroad triggered a surge in the rupee and buoyed stocks.
“There is an urgent need to reaccelerate infrastructure investment, especially in the energy sector, and to launch a new set of structural reforms, with a view to boosting business investment and removing supply bottlenecks,” the IMF said. “Structural reform also includes tax and spending reforms, in particular, reducing or eliminating subsidies, while protecting the poor.”
The government’s recent policy changes are “very welcome,” the fund also said. Its forecast for economic growth in 2013 compares with an estimate of 6.5 percent in July.
Indian inflation probably accelerated to 7.71 percent in September, a nine-month high, according to a Bloomberg News survey before a report due Oct. 15. The Reserve Bank of India has left interest rates unchanged since a cut to 8 percent from 8.5 percent in April, the first reduction since 2009.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net
To contact the editor responsible for this story: Shamim Adam in Singapore at sadam2@bloomberg.net
Gross domestic product will rise 4.9 percent in 2012, less than a July forecast of 6.1 percent, the Washington-based lender said in its World Economic Outlook report today. The expansion will accelerate to 6 percent next year, it said, helped by improving overseas markets and a boost to confidence from a recent government policy revamp.
“The outlook for India is unusually uncertain,” the IMF said. “Monetary policy should stay on hold until a sustained decrease in inflation materializes.”
India’s government began the policy overhaul last month to boost the economy and avert a credit-rating downgrade, snapping months of political gridlock. The steps to curb expenditure on subsidies, contain a fiscal deficit and permit more investment from abroad triggered a surge in the rupee and buoyed stocks.
“There is an urgent need to reaccelerate infrastructure investment, especially in the energy sector, and to launch a new set of structural reforms, with a view to boosting business investment and removing supply bottlenecks,” the IMF said. “Structural reform also includes tax and spending reforms, in particular, reducing or eliminating subsidies, while protecting the poor.”
The government’s recent policy changes are “very welcome,” the fund also said. Its forecast for economic growth in 2013 compares with an estimate of 6.5 percent in July.
Indian inflation probably accelerated to 7.71 percent in September, a nine-month high, according to a Bloomberg News survey before a report due Oct. 15. The Reserve Bank of India has left interest rates unchanged since a cut to 8 percent from 8.5 percent in April, the first reduction since 2009.
To contact the reporter on this story: Kartik Goyal in New Delhi at kgoyal@bloomberg.net
To contact the editor responsible for this story: Shamim Adam in Singapore at sadam2@bloomberg.net
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