Hindustan Times

Indian economy will grow by over 7.5 per cent: IMF

S Rajagopalan

February 21, 2006

The International Monetary Fund has forecast a growth of over 7.5 per cent for India this year.A report by the IMF’s Executive Board, released on Tuesday, noted that the Indian economy is “continuing to reap the rewards of more than 15 years of reforms”, but stressed that macroeconomic policies should remain vigilant with further efforts on deficit reduction.

“Notwithstanding high oil prices and a weak monsoon, the economy showed a remarkable resilience in 2004-05, with growth remaining robust and becoming broader-based,” the report said, adding: “These trends have continued in 2005-06, and growth of more than 7.5 per cent for the full year is expected.”

Stressing a further push on economic reforms, the report said: “With an acceleration of the reform process, India would be able to achieve sustained economic growth of 8-10 per cent, in line with the objectives of the authorities.”

The executive directors felt that the current favourable economic conditions provide a good opportunity to speed structural reforms. They made a particular mention of measures to improve the business climate and reform labour laws, saying these would help foster both private and foreign investment and job creation.

The directors supported the government’s broad economic thrust in addressing infrastructure bottlenecks, alleviating rural poverty and deepening global integration.

With domestic demand remaining strong, the directors recommended that the fiscal policy should counter demand pressures. They highlighted the need to meet the minimum adjustment required under the Fiscal Responsibility and Budget Management Act.

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