IMF backs India's GDP methodology; says currency pressure is not a sign of economic weakness

The International Monetary Fund IMF on Thursday said Indias strong economic fundamentals have helped it to withstand the global energy shock and that the pressure on currency should not be considered as an economic failure according to news agency PTIKrishna Srinivasan Director of the IMFs Asia and Pacific Department noted that India entered the recent energy shock with robust growth and fiscal discipline and responded effectively to the external challengesExchange rate pressure is not economic weaknessHe further said the exchange rate is a function of global interest rates investor risk appetite and oil prices He added that exchange rate pressures do not indicate a fundamental disconnect between the currencyrsquos performance and economic growthThe IMFs Regional Economic Outlook for Asia and Pacific said India was among the emerging economies that faced pressure on their currencies after the energy shockExchange rates and capital flows have become more volatile since the energy shock this year Several emerging market economies experienced depreciation pressures reflecting multiple factors particularly in Indonesia India Thailand and the Philippines although pressures have partially eased over the past few months the report saidIt said India was among the economies that stepped intervened in foreign exchange marketsAmid currency market volatility several economies have intervened in foreign exchange markets including India Indonesia Japan Korea and Sri Lanka complementing tighter monetary policy in some cases it saidRBIs measuresThe Reserve Bank of India had launched the concessional FCNR swap window on June as part of broader steps to encourage capital inflows Through this it mobilised around USD 133 billion which provided some support to the rupee before it again started depreciatingFollowing the RBIs measures on October 10 the rupee has been appreciating and was trading at 9486 against the US dollar in the early deals on Thursday RBI Governor Sanjay Malhotra on Wednesday said that the measures are aimed at ensuring an orderly foreign exchange market movement and to curb undue speculative activityThe RBI created a special window for oil marketing companies which will take the dollar demand away from the spot market and tightened rules governing forex derivatives trades to curb speculative bets against the rupeeIn addition it asked banks to create a 20 per cent reserve for dollar purchases of over USD 2 millionFinance Minister Nirmala Sitharaman had said that the rupee had depreciated significantly in the last year and a half and the RBI is trying to prevent excessive volatility in the currency marketIndias GDP calculation align with IMFs adviceSrinivasan said Indias updated GDP calculation methodology aligns with best practices and is entirely consistent with IMFs adviceThese revisions to the methodology are entirely consistent with what the advice weve been giving them including from our statistics department Srinivasan said adding that India had also issued a note to explain the revisions to the GDP methodologyIn terms of GDP numbers what they have done is consistent with good practices I would say theres always room for improvement but lets recognise the good work done by MOSPI Ministry of Statistics and Programme Implementation for improving GDP statistics he saidWith inputs from PTI