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Washington, July 7: Indian economy is rebounding strongly providing a golden opportunity to tackle fiscal challenges decisively but steady rise in debt of the Centre and state governments could constrain the growth, according a new IMF report.
The economic growth was strong in 2003-04 and its economic ties with other countries have strengthened, with services exports — largely information technology — also leading the way, the IMF said in its publication “Finance and development”.
The IMF also notes that there is a steady rise in the Centre and states’ debt, which, “over the medium term, could constrain growth.” “The current account surpluses and strong capital inflows have heated foreign reserves, reducing external vulnerability. The recovery was strengthened in agriculture, following a severe drought in 2002-03, but services are increasingly driving India’s economy,” it said.
Indian exports benefited from competitiveness gains in the past three years despite the recent strengthening of the rupee against the US dollar. Despite fiscal deficits, interest rates have fallen with global integration, and inflation is moderate, it added. At the same time, it points out that while the fiscal situation improved, it “still poses serious challenges and risks, with deficits diverting savings from more productive areas.”.
— PTI
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