India’s inflation will moderate to 5.2 percent: IMF

April 10th, 2008 - 1:52 pm ICT by admin  

By Arun Kumar
Washington, April 10 (IANS) Even as India’s annual rate of inflation has touched a three-year high of seven percent in recent weeks, the International Monetary Fund (IMF) says it will moderate to 5.2 percent in the current calendar year. In its latest World Economic Outlook, the Washington-based organisation says inflationary expectations had picked up around the globe due to sharp increases in food and energy prices, particularly intensifying in emerging economies.

But in India the alarming rise in consumer prices in the recent past is expected to moderate to 5.2 percent in 2008 and four percent in 2009, as against 6.4 percent in 2007, the organisation predicts.

At the same time it has projected that the country’s economic growth will slow down to 7.9 percent this year, against 9.2 percent in 2007, but again increase slightly to 8 percent in the year after.

“In India, monetary tightening earlier in the year led to an easing of inflation by the end-2007. However, inflation started to pick up in 2008, owing to rising commodity prices,” the IMF report said.

Then forecast come in the backdrop of India’s annual rate of inflation rising to a three-year high of seven percent in the week ended March 22 - with low buffer stocks and spiralling prices of essential commodities.

Briefing reporters after the release of the report Wednesday, Simon Johnson, the economic counsellor for IMF, said emerging economies had become important players in the more integrated global economy today against the backdrop of soaring prices.

“Commodity markets have remained buoyant overall and in many cases have touched new highs, reflecting the still strong demand from emerging economies such as India and China, sluggish supply responses, and the increasing attractiveness of commodities as an asset class,” he said.

“The resulting inflationary pressures are particularly intense for emerging economies, where food and energy account for a large share of their consumption baskets and where growth has held up reasonably well.”

The report said the IMF’s commodity price index rose by 44 percent from February 2007 to February 2008 with prices of many commodities — including crude oil, tin, nickel, soybean, corn and wheat reaching record highs.

“Strong demand from emerging economies has accounted for much of the increase in commodity consumption in recent years and has been the driving force in the price run-up,” said Johnson.

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