The International Monetary Fund (IMF) Thursday suggested India withdraw fiscal and monetary policy stimulus gradually, develop export infrastructure and scale up shipments by getting into free trade agreements with key trading partners, in a bid to maintain comfortable external sector balance over medium term.
These steps, the Fund said, should also be accompanied by further liberalisation of the investment regime and a reduction in tariffs, especially on intermediate goods.
Amid a depreciation of the rupee against the dollar, the Fund suggested that interventions in the forex market be limited to “addressing disorderly market conditions”. Given that the Reserve Bank of India (RBI) already has comfortable level of foreign exchange reserves despite recent drop (these are still enough to cover eight months of imports), accumulation of additional reserves is less warranted, it said.
In its 2022 External Sector Report, the IMF also said: “Structural reforms could deepen integration in global value chains and attract FDI…” FE