IMF bullish on India

Indian consumers have money to spend

The International Monetary Fund has described India's recent economic performance as remarkable - but says more needs to be done.

In its twice-yearly assessment of the world economic outlook, the IMF predicts continued strong growth this year and next.

But it warns there are risks to the optimistic outlook because of imbalances in some of the leading developed countries.

The report is published ahead of the IMF and World Bank annual meetings in Prague.

Positive outlook

Despite the rise in oil prices - India is a major importer - economic growth is expected to rise to a very robust 6.34%.

The Indian economy will continue to grow

The pace of GDP expansion is expected to remain steady at 6.7% in 2000 and 6.5% in 2001.

It reflects the strength of the information technology sector and an improvement in agricultural production.

"Nonetheless, significant policy challenges need to be addressed in order to sustain high growth and facilitate poverty reduction over the medium term," the IMF said.

Government finances have deteriorated and the overall public sector deficit is estimated at 11% of the size of the whole economy in the last financial year, adversely affecting private investment.

Reforms

The report says there are signs of continued financial difficulty in the states and there have been delays in bringing fuel prices into line with import costs as oil prices rose.

Combined with this year's budget, these suggest a risk of little or no improvement in the public sector financial situation.

There's also a need for reforms to reduce the role of government in agriculture and industry to allow the private sector to reap the full benefits of globalisation, the IMF says.

The IMF says Pakistan would also benefit from unshackling its economy.

Along with Bangladesh, the Pakistan economy will grow at a rate of at least 4% in 2000 and 2001, it says.