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India needs to tighten monetary policy, says IMF

India needs to tighten monetary policy, says IMF
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First Published: Wed, Jul 02 2008. 07 50 PM IST
Updated: Wed, Jul 02 2008. 07 50 PM IST
Sridhar Krishnaswami / PTI
Washington: The impact of surging food and fuel prices being felt globally is “not so big” in India but it needs to tighten its monetary policy, the IMF has said as it warned that some countries will not be able to feed their people and maintain economic stability if the hike continues.
“Some countries are at a tipping point,” said International Monetary Fund Managing Director Dominique Strauss-Kahn at the release of a new IMF study which says the effect of price hike is most acute for import-dependent poor and middle-income countries confronted by balance of payments problems, higher inflation and worsening poverty.
“If food prices rise further and oil prices stay the same, some governments will no longer be able to feed their people and at the same time maintain stability in their economies,” he said.
Kahn said such countries needed help from the international community for good policy options. “Their challenge is ours. It is to ensure adequate food supplies while preserving the poverty-reducing benefits derived in recent years from faster growth, low inflation, and better budget and balance of payments positions,” he added.
But a senior official of the IMF told PTI that although India has not been flagged in the latest report because of many “mitigating factors”, the broad general policy implications apply.
“India is a large country and it has $312 billions in reserves. The fact that you had a near doubling of oil prices over a period of year is going to impact the current account and you are seeing it,” said Kalpana Kochhar, Senior Advisor in the Asia Pacific Department of the Fund.
“You would not have seen Indian highlighted.... The impacts are big but not so big. There are positive inflows and the results are still large,” she said.
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First Published: Wed, Jul 02 2008. 07 50 PM IST