The International Monetary Fund forecast on Thursday that the Indian economy will grow 5.5 per cent in 2003-04 with some upside potential, but said fiscal deficit and public debt were an economic burden.

Inflation was expected to hover around 4.5 per cent by the end of 2004 with the current account seen in surplus, according to a release issued on Thursday.

"India should use the current favorable external and interest rate environment to build political consensus to accelerate fiscal and structural adjustments," the release said.

"The strategy of postponing consolidation while attempting to stimulate growth is risky, and few countries have had success in growing out of severe fiscal problems without implementing a comprehensive reform program," the release added.