Washington: Challenging IMF's latest growth projection of a low 3.8 percent for India for the current fiscal, Finance Minister P Chidambaram has called for reviewing its methodology and questioned the credibility of IMF's surveillance activities.
The Finance Minister was referring to the India's growth rate, which was projected at 5.6 percent (at market prices) in the WEO July Update, now revised significantly downwards to 3.8 percent.
"We do not share this pessimistic outlook. We also believe there is a need for reviewing the methodology for growth projections as in the past International Monetary Fund (IMF) projections have often been at divergence with final growth numbers," the Union Finance Minister said on Friday.
Noting that the recent financial market developments have taken all by surprise, Chidambaram said an important question is why on-going Fund surveillance failed to foresee the market impact of exit from unconventional monetary policy.
"The IMF's failure to identify certain risks and give clear warnings has demonstrated yet again the weakness of its Surveillance framework. It also questions the relevance and usefulness of the IMF exercise with regard to policy settings of member countries because repeated downward revisions could significantly influence market expectations besides spreading gloom," he said.
"Although the Fund has taken various measures to strengthen its surveillance activities, particularly with regard to spillovers, there is need for further reflection so that it is better able to foresee the oncoming significant global macroeconomic developments," he added.
"The surveillance should be forward looking and it should forewarn the member countries of the impending threats, if any, to the global economy," the Union Finance Minister said.
Earlier this week, addressing a Washington think-tank, Chidambaram said that he believes the Indian economy will grow at over 5.0 percent and perhaps closer to 5.5 percent in 2013-14.
Chidambaram said the IMF needs to undertake a detailed? study as to how the unwinding will unfold, what impact it will have on advanced and emerging market economies, and how they should deal with the evolving situation.
"The Fund must play a role in better informing the spillover effects in a globally integrated world, so that advanced economies can take them into account while formulating their policies," he said.
First Published: Sunday, October 13, 2013, 09:51