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Last Updated: Thursday, 22 July, 2004, 13:33 GMT 14:33 UK
Wages to surge in India, says IMF
Ford factory in India
Job opportunities are likely to increase, say economists
Indians can look forward to their incomes increasing eightfold over the next four decades, according to International Monetary Fund economists.

India has the potential to boost output per person by 5.3% annually, new IMF research maintains.

India's economy grew 8.2% in the year to March - the country's fastest expansion in 15 years.

The surge was attributed to a bumper monsoon, leading experts to say India can grow by no more than 6% in future.

IMF economists Dani Rodrik and Arvind Subramanian in an IMF working paper, Why India can grow at 7% a year or more: Projections and Reflections, say those estimates may be too conservative.

They say this is because:

  • Economic opportunities are likely to remain bountiful and may increase

    • India's young population will favour growth. As a result, the country's savings rate is likely to rise to 39% of GDP by 2025 from around 25% at present

    • India's labour force will grow 1.9% a year, although lack of education will limit the impact of this on growth

    They say their estimates may be too low, as many Indians may begin to view education as a way out of poverty.

    Unlike China, India does not have to substantially reform its institutions, they say, since it already has strong economic and political structures.

    Cucumber farmers in Allahabad, India
    The poor want more market reforms, Rajan says
    Productivity could also be improved, especially if reforms are introduced, although debt still remains a worry.

    On the issue of reform, the IMF's chief economist on Thursday urged the Indian government to increase the poor's access to health and education.

    "It's important to show them they'll have greater access to education and healthcare and that they will be able to stand up and compete in the much more competitive economy once it opens up," said Raghuram Rajan, speaking in Singapore.

    He said he did not believe the defeat of the Hindu nationalist Bharatiya Janata Party in May's general election was due to the poor's dissatisfaction of reforms introduced by the party.

    "I don't take away the message from the Indian elections that the majority of poor voters were against the spread of markets and the reform process.

    "Instead I take away that they wanted more. They wanted it faster," he said.

    New budget targets India's poor
    08 Jul 04  |  Business
    India 'set for 7-8% growth'
    07 Jul 04  |  Business
    Reforming India's maddening tax system
    05 Jul 04  |  South Asia
    India stays on fast-growth track
    30 Jun 04  |  Business

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