IMF states that India’s average inflation is likely to increase to 5.2 per cent in FY 2018-19

The International Monetary Fund (IMF) said a steep rise in the domestic demand, rise in government sponsored procurement prices of farm produces and jumping crude oil prices have resulted in the current inflationary trends in the country.

India’s average inflation is likely to increase to 5.2 per cent in the financial year 2018-19 from a 17 year low of 3.6 per cent recorded in the last fiscal year, the IMF pointed out in its report on Wednesday (8).

Reserve Bank of India (RBI) raised repo rate for the second time by 25 basis points to 6.5 per cent and expressed its concern over possible inflationary trends in the domestic market in the near future. India’s annual consumer inflation rate touched 5 per cent in June, 2018 staying above the RBI’s medium 4 per cent target.

According to an estimation by the IMF, global crude oil prices are likely to average $72 a barrel in 2018-19, up from $62 stated in its earlier forecast for global crude oil prices.

Ranil Salgado, IMF mission chief for India, sharing his positive outlook on India’s Good and Service Tax (GST) said, “GST created a unified national market for the first time by lowering internal barriers to trade effectively establishing a free trade agreement for a market of over 1.3 billion people. The tax is also expected to increase the amount of economic activity taking place in the formal sector of the economy – leading to better quality and more reliable jobs.”

“As a result, the goods and services tax should improve productivity and boost medium-term potential growth, while also creating room for the government to increase much needed social and infrastructure spending,” Ranil Salgado pointed out.