Days after the International Monetary Fund (IMF) flagged concerns on Indian data sets and exchange rate management, the Reserve Bank brass defended the country’s conduct and downplayed some of the concerns from the Bretton Woods institution.
Governor Sanjay Malhotra said the RBI’s estimates on GDP and inflation given by the government are “fairly accurate”, but accepted that there may be a scope for improvement.
Deputy Governor Poonam Gupta said Indian systems get classified as A or B in most aspects, including inflation, factory output, etc, but gets a “C” only on national accounts, and added that the poor grades are due to issues around base year.
“It is not about the quality of data, it is not about the sanctity of the numbers that are put out. It is about a base that is perceived to be dated. With this revision, I think they will be satisfied on this count,” Gupta said.
Similarly, on the exchange rate front, Gupta said IMF has three broad ways to classify a country, including fixed, floating and managed float, and added that nearly all the emerging markets have managed floats.
“Within the managed float, the RBI tries to curb volatility on each side of a reasonable level. IMF looked at past 6 months of the data, and they found this volatility to be contained in a range that they have in mind,” she said.
“Based on that, they have a subclassification which is called crawling peg. I wouldn’t read much into it,” the academic-turned-central banker added.
The IMF assessment is based on a cross country comparison, she said, adding that the fact remains that India is a “managed float just like most of the emerging markets”.