The International Monetary Fund's most recent assessment of the Indian economy is broadly in line with those of the Government of India and the Reserve Bank of India. The economy is expected to grow at a robust rate of 8.75 per cent this year and moderate to around 8 per cent during 2011-12. Since mid-2009, the pace of recovery, which is led by domestic demand, has been strong. Monetary and fiscal policies have been accommodative and the real interest rates have remained low. But, despite some attempts at fiscal consolidation, the fiscal deficit is high. There are other near-time challenges, high inflation being the most significant one. A few days after the release of the IMF report, food inflation shot up to 18.22 per cent. There is very little slack in the economy and this has spurred inflation in manufactured goods. The high food prices are due to supply side factors as well as a structural shift in the consumption patterns. As the RBI pointed out, the consumption of milk, eggs, meat, and other protein-rich items has increased and their prices have moderated less than those of cereals and pulses. It is highly unlikely that the year-end inflation targets will be achieved.
The IMF expects India's growth prospects to remain strong over the medium term. Rapid growth is expected to be supported by high investment and productivity gains. Most of the downside risks relate to the global economy. Surging capital inflows could spur further investment, but could also complicate macroeconomic management. Sustaining rapid growth over the medium term will depend, among others, on efforts to facilitate infrastructure investment — such as deepening the corporate bond market and lowering the cost of doing business. It is equally important to improve social indicators, even while carrying out fiscal consolidation. Few will disagree with the IMF's view that improving social outcomes and strengthening infrastructure are the two key pillars of a strategy to achieve rapid and inclusive growth in India. India's banking system is resilient and well capitalised. However, there is a need to constantly monitor asset quality especially when prudential norms for infrastructure are eased.
Keywords: IMF, Indian economy
Comments:
As recent assesment by IMF and other organisation has shown faith in indian economy when european and other advanced economies outlook is grim.Policy makers in new delhi will be in litle comfort when they will prepare budget and take dicision on exit from stimulus package.But as rightly described by editorial taming the inflation especially of food article will be very crucial because it is hitting hard the poorer and if the same will continue there will be no meaning of huge spending on social and economic empowerment.Taming the food inflation will be very crucial but the action by the govt is to mitigate the price rise that too marginally by importing some items.This will not going to help until we overhaul our agriculture and improve cold storage,food prpcessing plant and road infrastructure side by side.As far as action by RBI to suck liquidity from market is also have short term effect and it can disourage demand because less money will lead to less spending and that will affect manufacturing or investment.Hope we will come out from these challenges by improving our infrastructure.
While making economic predictions, Govt. should include external and internal security factors also because enemies will be interested in creating roadblocks for our developement.
INDIAN ECONOMY IS RISING FAST.