IMF hails RBI's recent policy actions
The International Monetary Fund (IMF) has welcomed the Reserve Bank of India (RBI)’s decision to raise repo rates by 40 basis points (bps). Shanaka Jayanath (Jay) Peiris, the lead author of the IMF’s Asia and Pacific Outlook told Indivjal Dhasmana of Business Standard that going forward, monetary policy will need to respond nimbly, including through well-communicated expectations about the trajectory of inflation and the path of policy rate actions to address any second-round inflationary effects. He also cautioned that any large movements in global equity markets from a sharper-than-expected tightening in the advanced economies would have implications for equity outflows from India. Peiris further stated that although India has fiscal space in the near-term, it would need to implement a medium-term fiscal consolidation strategy to help improve the trade-off between near-term macroeconomic stabilisation and medium-term fiscal sustainability. Commenting on exports, the IMF official said that they foresee the export growth to continue. However, the expansion will be less pronounced than it was projected before the war in Ukraine broke. The spillovers from the war in Ukraine are projected to substantially reduce external demand growth in Europe, which is an important destination for India’s exports.
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