Restore investor morale: IMF

The document made public to coincide with the IMF-World Bank annual meeting also says that neighbouring Pakistan faces even greater challenges as a result of the economic sanctions and in view of its vulnerable external and domestic financial situation and unfinished structural reform agenda.

From India, finance minister Yashwant Sinha, will be attending the annual meeting of the IMF-World Bank beginning later and is expected to discuss various issuesduring his meeting with IMF chief Michael Camdessu.

Earlier, in its annual report, the IMF had said that India was in a prolonged recession and was unable to tackle its mounting budgetary imbalances. It found that the fiscal deficit was dangerously large and growing and its reforms were foundering. The annual report of world bank has also spoken of the increased economic uncertainty after the sanctions in protest against India’s N-tests in May. More recently, the IMF, after the conclusion of the article four consultations, had expressed doubts over the modest reduction in the fiscal deficit targeted for the current fiscal. The executive board assessment pointed out likely slippages in both the revenue and expenditure estimates.

Moreover it was observed that, "reversal of certain budgetary initiatives run the risk of further undermining the credibility of the fiscal policy stance."

IMF directors had stressed that the near-term situation contained substantial risks, and the the reform agenda was far fromcomplete. It was pointed out that although contagion from the regional crisis and cyclical factors had contributed to the recent slowdown in industrial production and exports, there were also a number of fundamental structural constraints affecting growth compounded by uncertainties created by the political situation and international economic sanctions.