Indian economy grew 9% in 2006: IMF

The IMF has upgraded its estimate for India?s GDP growth in 2006 to nine per cent, its Executive Board announced, reports Pramit Pal Chaudhury.

The IMF has upgraded its estimate for India’s GDP growth in 2006 to nine per cent, its Executive Board announced on Wednesday. This is one percentage point higher than the estimate it gave in the World Economic Outlook last year.

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Charles Kramer, head of the IMF’s Asia and Pacific department, said there was stronger-than-expected real GDP growth for the July-September quarter. The growth was largely across the board, but particularly strong in terms of consumer spending and private investment.

The IMF said that with the new year, the Indian economy still had four major constraints.

The first was the threat of overheating given rising inflation and the credit boom. “The RBI is addressing the issue,” said the department’s deputy direct, Wendy Tseng. However, she said, “a moderation of growth would not be unwelcome” as it would allow India to grow in the medium-term.

Second, though government finances were the best they had been in a decade, the budget deficit remained high. The IMF said the deficit could actually fall below the ceiling set by law.

Finally, there were a number of structural reforms that needed to be pursued to ensure India could keep up its growth levels and create jobs. These included infrastructure, trade liberalisation, subsidy targeting and tax reform.

“Overall, we are optimistic about India’s prospects,” said Tseng.