The IMF executive board assessment report, prepared after annual Article IV consultation with the Indian officials, stressed that attainment of 8 per cent gross domestic product (GDP) growth rate would critically depend on the pace of fiscal consolidation and structural reforms. The report also warned of fiscal slippages in the current year given the pattern of revenue shortfalls in the recent years and the rollback of some measures announced in the Budget.
It stressed that India should try to improve the performance of public sector banks and introduce tighter loan classification rules from 2004-05 to strengthen the provisionsing rules.
Expressing concern about the sustainability of Indias fiscal situation, the IMF report said, the governments deficit is among the highest in the world and that general government debt (even excluding sizeable contingent liabilities) now stands at over 80 per cent of the GDP. It added that large primary deficits, growing debt, and the sharp narrowing of the growth rates differential are creating conditions for potentially unsustainable debt dynamics.