GDP to grow at 6.5%: IMF

The International Monetary Fund has said Indian economy would grow at a 'robust' 6.5 per cent but warned that huge fiscal deficit and public debt were impediments in sustained growth.

"India is on track for another year of robust growth in 2004-05," IMF said in an annual review of the Indian economy, noting that due to strong monsoon, growth had rebounded to 8.5 per cent in 2003-2004, the highest level in over a decade. However, it warned that "India's fiscal large deficits and public debt remain a key constraint on rapid sustained growth."

It underlined that without enhancing tax revenues and reducing lower-priority spending, it would be very difficult to address the country's large infrastructure needs.

On the brighter side, the IMF report said "This year, firms appear to have embarked on a new investment cycle, underpinned by strong credit growth.

"In spite of high world oil prices and a disappointing monsoon, staff projects growth of 6.5 percent this year, buoyed by the dynamism of industry and services."

The organisation said that a recovery in agriculture on normal monsoons in 2005-06 should support growth in the range of 6.5 per cent.

Expressing "serious concern" on the proposal to use foreign exchange reserves to finance infrastructure projects, the IMF urged India to step up efforts to improve investment climate and enhance regulatory framework for public-private partnerships.