No overheating but RBI must remain vigilant: IMF
The IMF has said the fall in inflation rate and slowdown in credit growth were positive signs but the RBI must remain vigilant to prevent overheating of the India economy.
By PTI |
WASHINGTON: The IMF has said the fall in inflation rate and slowdown in credit growth were positive signs but the RBI must remain vigilant to prevent overheating of the India economy.
"At this point I don't see or I would not assess the economy as overheating," Kalpana Kochhar, the senior Advisor in the Asia Pacific Department told agencies.
"With the actions they (Reserve Bank of India) took over the last twelve months... monetary conditions in general have been tightened. You are seeing inflation coming off and some slowdown in credit growth. These are all good things," she said.
The IMF official said there are still some underlying pressures like capacity constraints.
"Our view is that the RBI should be vigilant... earlier this year we had sort of assessed the situation as sort of over heating,," the senior official remarked.
Replying to a query on foreign exchange markets and the appreciation of the Indian Rupee, Kochhar said the pressure on the exchange rate is going to continue not because of any current account surplus but that India is a "story" that everyone wants to be a part of.
"The RBI's official policy has been to intervene to smooth volatility rather than to target a rate. Frankly the evidence is that's what they do, more or less. The Rupee is appreciating and volatility,if you measure daily movements, has gone up quite a lot in the last year," Kochhar said, adding "we would not have issues with that kind of policy-- moderating the pace of volatility while keeping the Rupee market determined...."
"At this point I don't see or I would not assess the economy as overheating," Kalpana Kochhar, the senior Advisor in the Asia Pacific Department told agencies.
"With the actions they (Reserve Bank of India) took over the last twelve months... monetary conditions in general have been tightened. You are seeing inflation coming off and some slowdown in credit growth. These are all good things," she said.
The IMF official said there are still some underlying pressures like capacity constraints.
"Our view is that the RBI should be vigilant... earlier this year we had sort of assessed the situation as sort of over heating,," the senior official remarked.
Replying to a query on foreign exchange markets and the appreciation of the Indian Rupee, Kochhar said the pressure on the exchange rate is going to continue not because of any current account surplus but that India is a "story" that everyone wants to be a part of.
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"The RBI's official policy has been to intervene to smooth volatility rather than to target a rate. Frankly the evidence is that's what they do, more or less. The Rupee is appreciating and volatility,if you measure daily movements, has gone up quite a lot in the last year," Kochhar said, adding "we would not have issues with that kind of policy-- moderating the pace of volatility while keeping the Rupee market determined...."
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