WASHINGTON - The International Monetary Fund on Tuesday urged India to keep policy rates on hold until high inflation is on a downward trend and to take steps to boost economic growth.
The IMF's annual economic health-check of India's economy stressed that the biggest challenge for the authorities was to bring growth back to its potential and lower inflation.
Earlier on Tuesday, the Reserve Bank of India announced its first interest rate cut in three years by an unexpectedly sharp 50 basis points to boost its economy.
Some IMF directors appeared to disagree on the underlying reason for the slow down in India, arguing that it is difficult to attribute it to economic "structural factors."
The IMF forecast that the economy would grow at about 7 percent in 2012 and 2013, down from the 8.4 percent levels of the last two years. It said inflation was projected to fall in the near term, but to stay above the Reserve Bank of India's objective.
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