The Hindu : Business : IMF sticks to 6-6.5 p.c. growth forecast

Online edition of India's National Newspaper
Sunday, Jan 09, 2005

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Business

IMF sticks to 6-6.5 p.c. growth forecast

NEW DELHI, JAN. 8. The International Monetary Fund (IMF) said today that tsunami disaster would not impact 6-6.5 per cent growth projections for India this fiscal, but the country's high fiscal deficit was a cause for concern.

"The 6-6.5 per cent growth in this fiscal is a reasonable projection. Going forward things will go well," IMF chief economist, Raghuram Rajan, said, stressing the need for more radical reforms, particularly in the labour sector such as introduction of `hire and fire' system.

Asked if tsunami would impact the growth prospects, he said, "We will stick to the earlier 6-6.5 per cent growth projections for India."

India should take advantage of the growth and undertake reforms; it should improve infrastructure and make labour market more flexible, Mr. Rajan said.

Mr. Rajan said that India could not become a financial hub unless it had full capital account convertibility (CAC). "Full CAC cannot happen before the country reduces its fiscal deficit significantly and also releases public sector banks from having to finance the government debt."

Referring to the Fiscal Responsibility and Budget Management Act, he said that once the revenue deficit was wiped out and fiscal deficit became manageable the country could target implementing full CAC from 2009.

.Asked about his 'budget wish', he said India should make progress in reducing fiscal deficit.

— PTI

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