Washington: Terming the Indian growth pattern as “impressive”, the IMF has said it does not foresee overheating of its economy as long as the current monetary policy is in place and its “independence is strengthened”.
“(India’s) growth has been impressive--9.7% in 2006, 8.9% in 2007 and we are viewing at 8.4% in 2008. That is really an impressive growth pattern,” IMF Managing Director Rodrigo de Rato said addressing a press conference here ahead of the annual meetings of the International Monetary Fund and the Word Bank.
Asked whether he saw any chance of the Indian economy “overheating”, de Rato said “We don’t see that if monetary policy continues to behave as is behaving right now and independence is strengthened in monetary policy”.
“With inflation coming up a bit in 2007, we think the monetary responses by the (Reserve) Bank of India have been appropriate... the credibility of the monetary policy in India has become better and stronger and the steps of the liberalisation of the financial markets of India are probably the steps in the right direction,” the top IMF official said.
The priorities for India down the road should be in keeping up with the drive towards further liberalisation like bridging major gaps in infrastructure, addressing the labour shortages in the skilled sector and opening up to foreign investment, he said.
De Rato noted that there has been flexible movement of Indian currency which is “good” for the country, adding that the confidence of investors in India is increasing.
“It will be a good example for other countries in the region to see that flexible exchange rates could be very useful to manage a booming economy as is the case of India. There has certainly been an important step up of capital inflows which shows that the confidence of investors in India is increasing,“ the IMF official said.
“We see the priorities in the continuation with this drive to liberalise the Indian economy, certainly to bridge the major gap in infrastructure including power and transportation,” de Rato said.
He stressed on the need to strengthen the country’s capacity to introduce the Indian labour force into the global market by increasing and the stepping up of educational reforms and to try to address the very strong shortages on skilled labour.
“We also see the need to keep increasing the openness of the Indian economy to foreign competition and to foreign investment in the interests of the Indian society,” de Rato maintained.