The Reserve Bank has kept the short term interest rates like repo and reverse repo rates as well as benchmark bank rate intact in its credit policy announced on Tuesday.
RBI keeps CRR, Bank Rate unchanged
However, the central bank increased the provisioning requirement for housing loans beyond Rs 20 lakh, personal loans and advances against shares, which might see some hike in interest rates on these loans.
"Inflationary pressures have picked up, promoting the Reserve Bank of India to tighten monetary policy. Nevertheless, with monetary conditions still accommodative and credit expanding strongly, further interest rate increases will likely be needed," IMF said in its World Economic Oulook report, released ahead of the Spring Meetings of the Fund-Bank.
IMF said activity in emerging market and developing countries remains very strong with forecasts revised upwards in most countries and regions.
"In emerging Asia, GDP growth in both China and India has continued to surprise on the upside driven by strong domestic demand," the report said.
"Along with the recovery in information technology this has supported an acceleration in activity in the rest of the region, although investment growth has yet to pick up substantially," it said.
The IMF projected comparable growth in China at 9.5 per cent for 2006 and slowing down to 9 per cent in 2007.
On world output, the report said in spite of higher oil prices and natural disasters, global economic growth has continued to exceed expectations aided by benign financial market conditions and continued accommodative macro economic policies.
"The momentum and resilience of the global economy in 2005 continued to exceed expectations. Despite higher oil prices and natural disasters, activity in the second half of 2005 was stronger than earlier projected, particularly among emerging market countries," it said.
On South Asia, the fund said growth in Bangladesh and Pakistan has remained robust in spite of "headwinds" from oil prices, the devastating natural disasters and the elimination of international textile trade quotas.
"In both these countries, inflation has picked up and a further tightening of monetary conditions is needed supported by continued prudent fiscal policies," the fund said.
Among the industrial countries, GDP growth is expected to moderate to 3.4 per cent in 2006, which will still be the highest among the G-7 countries.
IMF has drawn attention to three striking features of this favourable environment beyond the continuing strength of oil prices. First, the US current account deficit has continued to rise matched by large surpluses in oil exporters, China and Japan, a number of small industrial countries and other parts of emerging Asia.
Secondly, inflationary pressures remain "surprisingly" modest in that while global headline inflation has picked up in response to higher oil prices, the core inflation has been little affected and "inflationary expectations remain well grounded."
Thirdly, emerging markets and corporations remain large net savers and contributing to low long term interest rates.
The IMF has tempered its optimism by cautioning countries about certain factors that will be of primary concern: high and volatile oil prices, a tightening in financial market conditions, rising global imbalances and an avian flu pandemic with a worst case scenario exacting a heavy human and economic toll especially in the developing world.
© 2026