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More rate hikes must be carefully calibrated: IMF


NEW DELHI: Additional monetary policy tightening should be carefully calibrated and clearly communicated to balance inflationary objectives and impact on economic activity, the executive board of the International Monetary Fund (IMF) has said after its assessment of India’s economic performance.
The IMF assessment said that uncertainty around the growth outlook for India is high, with risks tilted to the downside. A sharp global growth slowdown in the near term would affect India through trade and financial channels. Intensifying spillovers from the war in Ukraine can cause disruptions in the global food and energy markets, with significant impact on India, it said after the discussions under Article IV.
The IMF has forecast a growth rate of 6.8% due to the less favourable outlook and tighter financial conditions. Reflecting broadbased price pressures, inflation is projected at 6.9% in 2022-23 and is expected to moderate only gradually over the next year.
The IMF executive directors observed that the exchange rate should continue to act as a shock absorber with foreign exchange intervention limited to addressing disorderly market conditions. They welcomed the authorities’ plans to introduce a central bank digital currency.
Under Article IV of the IMF’s articles of agreement, the multilateral agency holds bilateral discussions with members, usually every year. A staff team visits the country, collects economic and financial information, and discusses with officials the country’s economic developments and policies. On return to headquarters, the staff prepares a report, which forms the basis for discussion by the executive board, according to the IMF definition.
The directors encouraged the authorities to make additional progress on the structural reform agenda. Increasing female labour force participation, reducing youth unemployment and reducing informality remain critical to sustaining strong and inclusive growth.

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