The International Monetary Fund has projected India’s growth to pick up to around 9 per cent in 2006-07, and then moderate a bit in the following year. It also called for vigilance to guard against any potential risks of overheating and pointed out that over-performance on the 2006-07 Budget could support the Reserve Bank of India’s stance of continued gradual removal of monetary accommodation by channelling the anticipated revenue windfall to deficit reduction. It also projects WPI inflation to remain in the 5-5.5 per cent range in the near term. The evaluations were made on Thursday after the conclusion of the Article IV consultation by the executive board of IMF. It recommended steps to broaden the tax base by eliminating corporate income-tax incentives, paring exemptions, and reforming inter-state taxation to pave the way for a national goods and services tax. Measures advocated by IMF on the expenditure side include implementing the recommendations of government committees on subsidies, including the introduction of an automatic market-based mechanism for petroleum goods, and better targeting of kerosene subsidies.IMF also noted the need for greater progress in addressing structural obstacles to job-intensive, inclusive growth and also called for steps to strengthen implementation capacity and develop strong and independent regulators in the infrastructure sector to bolster investor interest in public-private partnership. It also encouraged the consideration of steps to maximise the contribution of SEZs to India’s growth strategy while limiting potential revenue losses.“The favourable conjuncture and outlook provide a good opportunity to accelerate key reforms to support the government’s vision of reducing poverty and creating employment by boosting growth,” pointed out executive directors of IMF.
