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Low commodity prices spur domestic demand in India: IMF
05 Sep '15
2 min read
In India, domestic demand is accelerating, underpinned by the large positive terms of trade shock (mostly due to collapsing commodity-import prices), according to an IMF executive summary based on a note on Global Prospects and Policy Challenges.
In India, one of the world’s largest commodity importers, growth will benefit from recent policy reforms, a consequent pickup in investment, and lower commodity prices.
While near-term growth prospects remain favourable and external vulnerabilities have decreased for India, some macroeconomic imbalances remain, the summary said. While the faster-than-expected fall in inflation has created space for considering modest cuts in the nominal policy rate, medium term inflationary pressures and upside risks to inflation remain. With balance sheet strains in the corporate and banking sectors, financial sector regulation should be enhanced, provisioning increased, and debt recovery strengthened.
The summary said structural reforms needed to raise sustainable growth differ across many countries. For India, those reforms include removing infrastructure bottlenecks in the power sector and implementing reforms to education, labor, and product markets to raise competitiveness and productivity.
The summary noted that in India, the post-election recovery of confidence and lower oil prices offer an opportunity to pursue much-needed structural reforms. (SH)
In India, one of the world’s largest commodity importers, growth will benefit from recent policy reforms, a consequent pickup in investment, and lower commodity prices.
While near-term growth prospects remain favourable and external vulnerabilities have decreased for India, some macroeconomic imbalances remain, the summary said. While the faster-than-expected fall in inflation has created space for considering modest cuts in the nominal policy rate, medium term inflationary pressures and upside risks to inflation remain. With balance sheet strains in the corporate and banking sectors, financial sector regulation should be enhanced, provisioning increased, and debt recovery strengthened.
The summary said structural reforms needed to raise sustainable growth differ across many countries. For India, those reforms include removing infrastructure bottlenecks in the power sector and implementing reforms to education, labor, and product markets to raise competitiveness and productivity.
The summary noted that in India, the post-election recovery of confidence and lower oil prices offer an opportunity to pursue much-needed structural reforms. (SH)
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