Imf Renews Fiscal Deficit Warning
The public sector deficit is close to 9 per cent of the GDP (gross domestic product). It definitely needs to be halved, IMF's research department director Michael Mussa said here yesterday.
Mussa said the reduction of the fiscal deficit, on a gradual and consistent basis, and continued structural reforms were essential to sustain stronger growth in India.
The IMF's World Economic Outlook forecasts slowing long-term growth in India largely because of high real interest rates and infrastructural bottlenecks.
There are risks of rising inflation and external vulnerability unless these issues are forcefully addressed, the report released in Washington says.
The report predicts that inflationary pressures are likely to become increasingly prominent in the next few months, reflecting the adjustments in administered prices.
It warns that a surge in oil imports, combined with slowing export growth, is likely to widen the current account deficit to 2 per cent.
Fiscal consolidation, it emphasises, is the key to relieving the pressure on prices and the balance of payments, to free resources for productive investment and to provide a more conducive environment for structural reform.
The IMF has been stressing in recent months on the need to rein in India's fiscal deficit. Fund official have repeatedly said that the fiscal deficit is their primary focus of concern in India's otherwise relatively satisfactory economic performance in the past few years.
United News of India adds: The high interest rates arise from the policy mix of large fiscal deficit and the resulting need for a tight monetary stance, says the World Economic Outlook, an yearly world economic and financial survey by the IMF staff, routinely made public on the eve of the annual Fund-Bank meetings.
For India, the IMF document notes, recent economic performance has been quite t.asp"-->