IMF Forecasts GDP Fall in India to 4.9% in 2012, Call for High
Interest Rates
Indian growth may weaken to a decade-low
this year after investment stalled, the International Monetary Fund said, as it
called for interest rates to remain unchanged until the nation’s high inflation
rate eases.
Gross domestic product will rise 4.9 percent
in 2012, the Washington-based lender said in its World Economic Outlook report
on 9 October, less than a July forecast of 6.1 percent.
The expansion will accelerate to 6 percent next year,
it said, helped by improving overseas markets and a boost to confidence from a
recent government policy revamp.
“The outlook for India is unusually uncertain,” the IMF said.
“Monetary policy should stay on hold until a sustained decrease in inflation
materializes.”
The IMF said. “Structural reform also includes tax and
spending reforms, in particular, reducing or eliminating subsidies, while
protecting the poor.”
The
government’s recent policy changes are “very welcome,” the fund also said. Its
forecast for economic growth in 2013 compares with an estimate of 6.5 percent in July.
India’s overall fiscal deficit may widen to 9.5 percent of gross domestic product in 2012, compared with a
projection of 8.3 percent in April, according the
IMF’s figures. The shortfall will be 9.1 percent next
year, higher than April’s estimate of 8.2 percent.
The gap was 9 percent in 2011, the IMF said.
While such steps are “significant,” underperforming tax
revenues and demand for more social spending because of a below-average monsoon
season are among obstacles to narrowing the fiscal shortfall, according to the
fund.
India’s
rupee has strengthened about 6 percent against the
dollar since the nation started the policy revamp, paring its decline in the
past year. The currency climbed 0.7 percent to
52.2675 per dollar, while the BSE India Sensitive Index of stocks advanced 0.8 percent.