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India’s recent move to adopt a symmetrical inflation target should provide a robust institutional foundation for maintaining price stability, the IMF has said in a report.
In its Global Prospects and Policy Challenges report published days before the weekend gathering of the G20 group of developed and developing nations in China, the IMF also endorsed India’s recently taken important steps towards a national goods and services tax (GST).
The national GST, when fully implemented, promises to boost tax buoyancy and growth, including enhancing the efficiency of the internal goods and services market, the IMF report noted.
India had in August this year adopted inflation target of 4 per cent for the next five years under a previously agreed monetary policy framework.
The Finance Ministry had notified this consumer inflation target of 4 per cent until March 31, 2021, for the Reserve Bank of India. An upper tolerance level of 6 per cent and lower tolerance limit of 2 per cent was also specified in consultation with the RBI Governor Raghuram Rajan.
Weak outlook Meanwhile, for the world economy, IMF report noted that low and falling growth coupled with rising inequality made for a challenging policy backdrop.
High frequency data points to softer growth this year, especially in G20 advanced economies, while the performance of emerging markets is more mixed.
The IMF called upon the leaders of the world’s leading economies to give further push to globalisation, noting that prolonged slow growth and rising inequality was eroding support for free trade and open markets.
Downside risks The fund also indicated that it would — when the World Economic Outlook is published next month -- be revising downwards its July prediction of 3.1 per cent growth for this year.
The global outlook remains subdued, with unfavourable longer-term growth dynamics and domestic income disparities adding to the challenges faced by policy-makers.
A period of low growth that has bypassed many low-income earners has raised anxiety about globalisation and worsened the political climate for reform. Downside risks still dominate, the IMF report noted.
On India, IMF sees continuing strong growth, underpinned by private consumption.
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