India needs to raise rates to tackle inflation, says OECD
Asking India to keep a vigil on spiralling inflation, OECD said the country should further tighten monetary policy to fight price rise.
By PTI | Updated:
NEW DELHI: Asking India to keep a vigil on spiralling inflation and volatile capital flows, OECD today said the country should further tighten monetary policy to fight price rise.
Paris-based OECD's comments come against the backdrop of India's headline inflation in May touching over 9 per cent, which is likely to force the Reserve Bank of India ( RBI) to embrace more hawkish monetary policy measures.
"Notwithstanding occasional spells of credit market pressure, further incremental monetary policy tightening is advisable to ensure inflation moderates and to prevent inflationary expectations becoming unanchored," OECD's Economic Survey of India said.
The Organisation for Economic Cooperation and Development (OECD) is a grouping of mostly developed nations and members of the bloc account for over 60 per cent of global economy.
"We would keep a close watch on developments, both domestic as well as international, in the coming months and make appropriate adjustments as we go along," Finance Minister Pranab Mukherjee said after announcement of May inflation numbers. The inflation stood at 9.06 per cent.
Noting that surging oil and food prices have also resulted in "stubbornly high inflation", OECD said further fiscal consolidation and monetary policy tightening would promote balanced growth.
"This, along with a stabilisation in international commodity prices should lead to a gradual decline in inflation over the course of 2011," the report said.
RBI has hiked key policy rates nine times since March 2010.
According to OECD, in the near term, the Indian authorities need to remain vigilant against the risks of high inflation and volatile capital flows.
The grouping also welcomed planned reforms in direct taxation and said "proposed Goods and Services Tax (GST) is an important reform".
Paris-based OECD's comments come against the backdrop of India's headline inflation in May touching over 9 per cent, which is likely to force the Reserve Bank of India ( RBI) to embrace more hawkish monetary policy measures.
"Notwithstanding occasional spells of credit market pressure, further incremental monetary policy tightening is advisable to ensure inflation moderates and to prevent inflationary expectations becoming unanchored," OECD's Economic Survey of India said.
The Organisation for Economic Cooperation and Development (OECD) is a grouping of mostly developed nations and members of the bloc account for over 60 per cent of global economy.
"We would keep a close watch on developments, both domestic as well as international, in the coming months and make appropriate adjustments as we go along," Finance Minister Pranab Mukherjee said after announcement of May inflation numbers. The inflation stood at 9.06 per cent.
Noting that surging oil and food prices have also resulted in "stubbornly high inflation", OECD said further fiscal consolidation and monetary policy tightening would promote balanced growth.
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"This, along with a stabilisation in international commodity prices should lead to a gradual decline in inflation over the course of 2011," the report said.
RBI has hiked key policy rates nine times since March 2010.
According to OECD, in the near term, the Indian authorities need to remain vigilant against the risks of high inflation and volatile capital flows.
The grouping also welcomed planned reforms in direct taxation and said "proposed Goods and Services Tax (GST) is an important reform".
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