IMF sees India's inflation hovering around 2%

IMF sees India's inflation hovering around 2%
The Financial Express, March 19, 2009, page 3

Washington, Mar 18 (PTI)

International Monetary Fund (IMF) expects India’s inflation to hover around 2% during 2009-10, mainly on account of declining commodity prices and weakening demand resulting from economic slowdown.

“With commodity prices waning and demand slackening, inflation is expected to fall further to 3% by March 2009 and to 2% on average in 2009-10”, the IMF said in its annual review of the Indian economy.

The inflation rate, as per the provisional government data, has dipped to 2.43 % for the week ended March 1, 2009, much ahead of the IMF’s March-end projection of 3 %.

As per the IMF data, inflation is expected to average around 8.8 % during the current fiscal which witnessed historic increase in crude oil and commodity prices in the international market and subsequent impact on the Indian economy.

The inflation, which peaked to 12.91 % in the second week of August last year, has been declining and the fall became sharper following the global financial meltdown triggered by the collapse of iconic American investment banker Lehman Brothers in September.

IMF holds Article IV consultations with the member countries annually as part of the surveillance and monitoring exercise.

Within seven months since August 2008, the rate of price rise slipped from about 13 % to less than 3 % towards the beginning of March.

Besides global developments and weakening of demand, the low inflation can also be attributed to government’s fiscal initiatives which include reduction in duties and lowering of prices of petroleum products like diesel, petrol and cooking gas.

Indian economy, according to the IMF is expected to moderate to 6.25% in 2008-09 from 9% in the previous fiscal.

Next fiscal (2009-10), according to the review, is likely to be even more difficult with economic growth expected to further slow down to 5.3%.

—PTI