Expecting further monetary tightening measures to control inflation, the International Monetary Fund (IMF) has scaled down India’s economic growth to 7.8 per cent this year, against the earlier estimates of 8.2 per cent. The revision is attributed by the IMF partly to slower economic expansion in world output and to recent corporate governance issues.
Similarly, growth projections for India has been revised downwards to 7.5 per cent in 2012, against the earlier forecast of 7.8 per cent.
In its latest World Economic Outlook, IMF said India along with Argentina and Russia requires higher monetary tightening than other countries which are in a position to postpone such a move. This was so because consumer prices are estimated to rise at an elevated level of 10.6 per cent on an average in 2011 year-on-year, even though it is less than the 12 per cent a year ago. However, the rates were expected to rise at 8.6 per cent in 2012.
The Reserve Bank of India has tightened policy rates 12 times since early 2010 to cool down inflation.
IMF said activity in India is expected to be led by private consumption. “Investment is expected to remain sluggish, reflecting, in part, recent corporate sector governance issues and a drag from the renewed global uncertainty and less favourable external financing environment.”
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