Active Stocks
Tue Mar 19 2024 11:50:47
  1. Tata Consultancy Services share price
  2. 4,018.90 -3.04%
  1. Tata Steel share price
  2. 148.10 -1.00%
  1. Bharti Airtel share price
  2. 1,232.60 0.62%
  1. Power Grid Corporation Of India share price
  2. 261.00 -1.51%
  1. ITC share price
  2. 409.75 -1.83%
Business News/ Market / Mark-to-market/  Even IMF is sceptical about India’s 4% inflation target
BackBack

Even IMF is sceptical about India’s 4% inflation target

IMF's latest World Economic Outlook database puts Indian inflation at above 5% till the end of 2019-20 and 4.9% by the end of 2021-22

Going by the forecasts, the IMF believes India will achieve 8% plus growth by 2021-22. Photo: BloombergPremium
Going by the forecasts, the IMF believes India will achieve 8% plus growth by 2021-22. Photo: Bloomberg

It isn’t just monetary policy wonks who doubt whether the Reserve Bank of India will ever achieve the 4% inflation target. The International Monetary Fund (IMF) seems to think so too. Its latest World Economic Outlook (WEO) database, released this week, puts Indian inflation at above 5% till the end of 2019-20 and 4.9% by the end of 2021-22. The chart has the details.

It is, of course, very doubtful if anybody can predict inflation that far ahead, but what it does show is the IMF, too, is sceptical about the 4% target being implemented.

Going by the forecasts, the IMF believes India will achieve 8% plus growth by 2021-22. Again, how anybody can predict growth that far ahead is a wonder, but what the numbers do imply is steadily accelerating GDP growth.

That growth will be achieved by a rising trend of both investment and savings. It’s interesting to note though that despite the higher growth, both investment and savings as a percentage of GDP will be lower in 2021-22 than in 2014-15, as the chart shows. Does the IMF really think that investment rates will never get back any time soon to 34% plus levels, let alone the 39% of GDP we saw in 2011-12? Nor do they seem to think savings rates will go up to the 36% of GDP level they reached in 2007-08 any time in the next few years.

The IMF also believes that the volume of both exports and imports are likely to pick up this year and show good momentum thereafter. The current dismal state of global trade is, therefore, a temporary hiatus, according to the IMF. But while an 8.1% increase in the volume of goods and services exports in 2018-19 may seem impressive compared to the contraction in 2015-16, it’s still much lower than the 27% growth notched up in 2004-05 or the 16-18% growth annually during 2005-08.

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 05 Oct 2016, 02:23 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App