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IMF: India on the right track with rate hikes

India’s central bank is doing the right thing by raising interest rates, and should continue on that path, according to the IMF.

“We believe that the tightening stance is appropriate for India in the medium-term, to promote sustainable and stable growth over many years, and not just focus on the next three months,” said the IMF’s senior representative to India, Luis Breuer.

Breuer, speaking at the Confederation of Indian Industry’s Partnership Summit conference, also said the Budget’s focus on prudence and fiscal consolidation “was a good step that will reduce and stabilise public debt, which is quite high in the country compared to other G20 countries”.

He said: “We think that a clearly spelled out medium-term fiscal plan that has ambitious fiscal targets, and a description of the policies to be followed to reach those targets can serve the country very well,” he added.

“India is facing challenges, most of which come from the international economy, we feel that the country is in a strong economic position, and is very well poised to face these challenges.”

Ashima Goyal, a member of the Reserve Bank of India’s Monetary Policy Committee, said: “I agree that we have a very large share of food in CPI headline inflation, which is the RBI’s target. The base year for this inflation is 2012. A lot of change has taken place since then and it needs to be revised.”

She added that India’s inflation was not due to excessive consumer demand and so there is much less tightening needed than the US.

In February, the RBI’s Monetary Policy Committee raised the repo rate by 25 basis points to 6.5 per cent to bring inflation back towards the central bank’s 4% target. The MPC has raised the repo rate by a total of 250 basis points since May 2022.

 

India ‘an attractive destination for renewable energy investments’

Green technologies are set to propel India’s economy towards a sustainable future, Union Minister for the Environment Bhupender Yadav, told the CII Partnership Summit conference.

Yadav said that “the world has started to recognise India as an attractive destination for renewable energy investments.”

He said: “The substantial investments in India’s green energy system are not only in financial terms, but also in terms of knowledge sharing. A number of countries have initiated discussions or have already started to work with India on green partnerships.”

He said India had demonstrated global leadership in promoting renewable energy and adapting to the damage caused by climate change and “is looking beyond borders through international initiatives such as the One Sun One World One Grid, the International Solar Alliance and the Coalition for Disaster Resilient Infrastructure, all aimed at strengthening the global effort to fight climate change.

 

Government backs tech firms after SVB collapse

Union Minister of State for Electronics & Information Technology, Rajeev Chandrasekhar, has reassured Indian technology start-ups that their short-term future is safe following the collapse of lender Silicon Valley Bank (SVB), which specialised in lending to the sector.

He held a virtual meeting with start-ups and assured the 400-plus that attended that the government is focused on helping them navigate through the situation.

He also emphasised that start-ups should start relying on the country’s own banking system. “The Indian banking system is trusted and robust and start-ups must start using it,” he said.

During the hour-long discussion, Indian start-ups said they managed to withdraw their deposits from SVB accounts after US authorities announced support measures to limit the damage from the collapse.

Chandrasekhar also said both the IT and finance ministry are working on a formula to ensure Indian start-ups do not feel any liquidity crunch.

“The finance ministry and RBI will be looking at policies to shield startups from any such closures in future,” he said.