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India has never defaulted on payments: IMF

July 18, 2003 21:13 IST

Praising India for its strong balance of payments and comfortable foreign exchange reserves, Kenneth Rogoff, the outgoing chief economist of International Monetary Fund said even though India borrowed heavily in 1991 to get over its economic woes, it has never defaulted on loan payment.

He went on to say that it was a healthy sign that India was no longer borrowing from the multi-lateral agency. "IMF had projected a good growth for India but the question is what will it take to achieve the eight per cent rate as outlined in the 10th Five-year Plan. The reforms have slowed down but the reason is not clear," he said.

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Encouraged by India's strong economic fundamentals, IMF, for the first time, selected India to become a member of its Financial Transaction Plan.

Accordingly, India contributed $205 million to the FTP, thus turning from a debtor into a creditor to the IMF.

The decision to select India as a member of the FTP sends a strong signal of the country's strength and the resilience of its external sector to the international community.

Advocating the need for flexible exchange rate, particularly in other Asian countries, Rogoff said, "If one restrains appreciation of exchange rate then one will witness an upward pressure, which in turn could result in pushing up the inflation level."

Inflation up to a certain level of four to five per cent was manageable but anything beyond that could pose a problem, he warned and added, nearly all major crisis in the last 10 years have been witnessed by countries with a fixed exchange rate.

On global development, Rogoff said India and China have played a major role.

Referring to the IMF chief economist designate Raghuram Rajan, the first Indian to assume this post, Rogoff said, "He is an expert in banking and finance and these two sectors are going to become very important in the future. Apart from this, he will also bring the perspective of developing nations with him."

Earlier in the day, he called on the Reserve Bank of India governor Bimal Jalan and other officials of the apex bank.

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