India needs to accelerate reform to achieve higher growth: IMF
Washington: International Monetary Fund (IMF) on Wednesday said India would need to accelerate economic reforms to achieve its "potential" growth rate even as it expressed concern over high inflation.
In a statement issued after its Article IV Consultation with India, the IMF said that Reserve Bank of India (RBI) should be ready to increase rates to check any further rise in inflation.
The statement comes a day after RBI reduced interest rates by 0.50 percent to arrest declining growth.
"A major challenge will be to bring growth back to potential and ensure its inclusiveness, while further lowering inflation... This will require a reinvigoration of structural reforms and fiscal consolidation," IMF said after its annual discussion with the Indian government termed as Article IV Consultation.
Indian economy was growing at over 9 percent before the global financial crisis in 2008 pulled it down to 6.7 percent in 2008-09. The growth rate in 2011-12 touched a 3-year low of 6.9 percent on account of factors like high commodity prices, slowdown in domestic demand and RBI's tight money policy.
"Growth risks are to the downside. The main domestic risk is a further weakening of private investment if government approvals do not accelerate, reform efforts are not reinvigorated, and inflation remains high and volatile," the IMF said.
In its World Economic Outlook released yesterday, the IMF has projected a moderation in the GDP growth of the world economy and said that Indian economy will grow by 6.9 percent in the calendar year 2012.