The IMF estimate comes in the wake of India revising upwards its growth estimates for last fiscal to 9.6 per cent from earlier calculation of 9.4 per cent a few days ago.

The IMF directors, however, differed on their view on whether India should go for temporary controls to moderate capital inflows or not. While a number of directors supported Reserve Bank of India’s cautious approach towards managing capital flows, including through “temporary capital controls”, some others cautioned against it. “India’s economy, which has been resilient in the face of heightened global uncertainties, slowing US growth, and high world oil prices, is expected to expand by 8.75 per cent this fiscal year as a result of rising productivity and investment,” the executive directors said.

Financial stability

The economy expanded by 9.3 per cent in the first quarter and 8.9 per cent in the second quarter of this fiscal. Commending India’s success in containing inflation and maintaining domestic financial stability, the directors observed that large capital inflows have exacerbated tensions among exchange rate stability, monetary independence, and financial openness. The IMF, however, has backed RBI’s management of liquidity and accommodation of increased exchange rate volatility, while noting appreciation pressures on the rupee.