INDIA NEEDS TO TIGHTEN ITS MONETARY POLICY

The IMF has said that 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 statement was made while the IMF warned that some countries will not be able to feed their people and maintain economic stability if the hike continues.

According to a new IMF study, 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.

International Monetary Fund Managing Director Dominique Strauss-Kahn has observed that some countries are at a tipping point and 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.

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.

According to a senior official of the IMF although India has not been identified among the above group of countries because of many "mitigating factors", the broad general policy implications will also apply to India.

Contributed by:
Prof. Bikramjit Sen
(Globsyn Business School)

Source: http://www.ptinews.com/pti%5Cptisite.nsf/0/63779CAF3C5089486525747A001AE8D5?OpenDocument