India should start working towards fiscal consolidation,says IMF chief

IMF managing director Dominique Strauss-Kahn today said that though India,a leading power,has done remarkably well due to sound macro-economic policies

IMF managing director Dominique Strauss-Kahn today said that though India,a leading power,has done remarkably well due to sound macro-economic policies,the country should now start working towards fiscal consolidation.

India belongs to the top 10. Though it is facing inflation and high current account deficit,nothing is worrying about it. Its normal for an economy growing at this pace. The challenge India faces is to come back on the path of fiscal consolidation,reducing public debt. It is time to rebuild fiscal buffer because we never know when the next crisis will take place, Kahn said.

Early during the day,the IMF chief met finance minister Pranab Mukherjee and Prime Minister Manmohan Singh and discussed Indias economic situation and the growing relationship between India and the IMF.

On Indias strategy on capital inflows,Kahn said it will help attract the targeted investment of 1 trillion in the infrastructure sector during the 12th Five-Year Plan 2012-17.

So in my view,the Indian approach on capital inflows is the right one8230; so the capital inflows may prove even more useful for infrastructure development, he said adding that capital flows are beneficial for economies when they are driven by growth prospects.

Kahn further said it is important for India to make use of the high growth rate and high tax revenues the country is enjoying at present .

Indias deficit management target is very important,to rebuild the buffer is very important. Indian government should recreate fiscal space he said adding the country should high growth rate for the purpose.

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Describing India as an economic powerhouse,the multilateral funding agencys chief said the country has done remarkably well due to sound macroeconomic policies and it is the driving force in global recovery. However,he added,rising economic power will have to take rising economic responsibility.

Speaking on the next IMF chief,Kahn said new heads of the World Bank and the IMF should be from countries other than Europe and the US. Let us be candid. I think the so called agreement between the US and European whereby the IMF head was European and World Bank President was an American is over8230;so I think it would be just fair that the next leaders of the two institutions will come from somewhere else in the world, he said.