IMF chief suggests agenda for India
sandesh prabhudesai | 04 March 1997 23:21 IST
Well-designed fiscal consolidation, well-targeted social safety nets and avoiding unproductive expenditures are the most difficult challenges set before a developing country like India to emerge as the leading and dynamic country in the 21st century, says Michel Camdessus, the managing director of the International Monetary Fund.
Addressing a meet organised here by Goa Chamber of Commerce and Industry yesterday, the IMF chief stressed upon tackling the large fiscal deficit decisively to maintain macro-economic stability and to raise national savings when India is at crucial crossorads.
Stating that India is on a right track of liberalising trade and opening the doors to foreign investment, Camdessus felt that the five-year experiment has shown substantial increase in private savings and investment with a growth rate of seven per cent.
Expansion of savings to finance critical investment, improved efficiency from greater competition and spillover of technology would all contribute to significantly raise living standards across all of India's population. It's growing as a matured economy in the World, he said.
Pointing out at the recent high real interest rates and credit constraints leading many Indian firms to postpone investment, the IMF chief also asserted that launching a bold second wave of structural reforms is necessary at the crucial juncture.
Any attempt to bring down interest rates through faster monetary expansion would only lead to high inflation, which would hurt the poor the most, he cautioned. In order to overcome this risk, he suggested to liberalise trade, strengthen the financial sector and formulate policies which allow firms greater flexibility to respond to competition and structural change.
For a sustainable economic development, he feels, India also needs more resources in terms of education and infrastructure. Rooting out corruption is also the primary task to be taken up, by streamlining administration, reducing economic intervention and improving the governance rather than simply making more legislations, which ultimately make a way for more corruption.
While praising the union budget presented by the United Front government last week, he denied the IMF dictating terms in drafting the fiscal policies. ''There is nothing to dictate as the government is doing what needs for the country's development'', he claimed.
