International Monetary Fund managing director Rodrigo de Rato on Thursday advised India to accelerate reforms.
"The (2005-06) Budget makes a good start. But more dramatic action could have significant benefits," Rato said in his address on "India: Prospering in a globalised economy" at the Reserve Bank of India.
The IMF chief wants India to go in for quicker cuts in tariffs combined with lowering of non-tariff barriers.
Reforms in labour laws and changes in business regulations, to allow Indian business to achieve scale of economies and participate in international production chains.
Average trade tariffs in India is about 22 per cent and the government plans to lower that to the Asean levels at around 8 per cent by 2009.
India's comfortable external position, with reserves increasing steadily in recent years, presented a perfect opportunity to speed up reforms, Rato said, while opposing use of foreign exchange reserves for funding infrastructure investments. "Use of Forex reserves will be a mistake," he said.
India will gain from openness to the global economy. Its stock of FDI is currently 5 per cent of the GDP, against 31 per cent for Thailand and 35 per cent for China.
"India needs to become an easier place to do business. To start a business in Korea, it takes 22 days and in China 41 days against 89 days in India, which defines the problem in India," Rato said.
India still remains a relatively closed economy, overlooked by the its emergence as a global leader in service exports.The country's share in global trade is still less than 1 per cent. India needs to generate in excess of 100 million jobs in the next decade just to keep the unemployment rate from rising and only a substantial increase in industry's share in the GDP is achieved from the current 27 per cent.