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The International Monetary Fund (IMF) warned that India needs to tighten its monetary policy to maintain the economic stability amid surging fuel prices and souring inflation rate. The impact of the later is not so big but the need of the hour is to stress on monetary policies and plans to be able to feed their people properly.

IMF Managing Director Dominique Strauss-Kahn at the release of a new IMF study said, “If food prices rise further and oil prices stay the same, some governments will no longer be able to feed their people and at the same time maintain stability in their economies.”

The latest IMF study says that the effect of price hike is most acute for import-dependent poor and middle-income countries confronted by balance of payments problems, higher inflation and worsening poverty.

Kahn said, “Some countries are at a tipping point.” Kahn said such countries needed help from the international community for good policy options.  “Their challenge is ours. It is to ensure adequate food supplies while preserving the poverty-reducing benefits derived in recent years from faster growth, low inflation, and better budget and balance of payments positions,” he added.

Kalpana Kochhar, senior advisor in the Asia Pacific Department of the fund said, “India is a large country and it has USD 312 billions in reserves. The fact that you had a near doubling of oil prices over a period of year is going to impact the current account and you are seeing it.”

“You would not have seen Indian highlighted…. The impacts are big but not so big. There are positive inflows and the results are still large,” she added.

IMF study revealed that India is also struggling with the global problem of inflation and fuel price hike but the effect of these problems can be reduced by only changing the monetary policies and strong economic plans.

Tags: Economic Stability, Fuel Prices, IMF, India, inflation rate, International Monetary Fund

After Bush has blamed Indian middle class behind the soaring food prices, India has blamed the policies of World Bank and IMF and “excessive and unsustainable” demand in developed countries for the crisis.

“This consumption trend has existed for more than a decade,” said Indian UN Ambassador Nirupam Sen.

He pointed out that over last two years, the demand for oil has gone up one per cent but prices in dollar terms have risen by 90 per cent. The issue was sparked off after the US and EU said the growth of India and China which has led to rise in consumption level has led to the shortage.

Addressing a special meeting of the United Nations economic and social council to consider the issue of rising food prices, he held financial crisis leading to weakening dollar and diversion of grains to production of bio-fuels among the major causes.

Policies followed by the Bretton Woods Institutions (BWI) are also behind the inflation according to Sen. He severely criticized their advice to countries to shift from food crops for domestic population to cash crops for exports.

“They seem to feel that subsidies are good for the rich but bad for the poor,” Sen said such policies had “predictable negative impact” on food production.

The debate came in the backdrop of UN agencies warning that more than one billion could added to those already needing food assistance because of high prices.

Tags: Bio Fuels, Bush, China, IMF, India, UN, US, World Bank