India faces overheating risk: IMF

Even as the Indian economy records impressive growth, the challenges lie in dealing with overheating in the face of accelerating inflation, booming credit and soaring asset prices, says an IMF survey. 8220;Overheating is an increasing risk and inflation-adjusted interest rates are low, whereas money, credit, and asset prices are booming 8212; all signs of overheating,8221; the survey points out. It emphasises the need to strike a balance to achieve sustainable growth 8212; through macro economic policies along with reforms and job creation.

The survey also defines four critical policy areas 8212; managing price and financial stability by limiting the near-term risk of overheating in demand and strengthening financial regulation, achieving fiscal sustainability by reducing high debt, broadening and deepening the financial sector, and promoting job-intensive growth.

Endorsing the RBI8217;s succession of interest rate hikes, the survey says that by continuing to tighten monetary policy and following prudential standards, the RBI can limit the risks of an inflation overshoot.