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Reform could lift India growth above eight per cent: IMF

IMF managing director Horst Koehler backed India's structural reform efforts on Friday, and said they could thrust the country's annual economic expansion through the five to six per cent range to beyond eight per cent.

"The government is absolutely on the right track to have defined structural reforms as the major vehicle to lift up this growth rate of five to six per cent to maybe eight per cent and even more. It is possible," Koehler told a news conference.

The IMF's twice-yearly World Economic Outlook report on Thursday forecast that India's economy would grow by 5.6 per cent in 2001 -- down from 6.4 per cent last year -- as the country overcame the effects of January's devastating earthquake in Gujarat.

The Reserve Bank of India, meanwhile, forecasts gross domestic product could grow by 6.0-6.5 per cent in the current year.

Sustaining growth, reducing poverty and cutting the public sector deficit were identified by the IMF report as India's key policy challenges in 2001.

The Lok Sabha passed the government's reform-oriented Budget for 2001/02 on Wednesday in a move that Finance Minister Yashwant Sinha said would put the "feel good factor" back into the economy.

A package of privatisations, subsidy cuts and other structural reforms is being backed by India's coalition government, led by the Bharatiya Janata Party.

Last month the government lifted import restrictions on more than 700 products ranging from cars to watches as it opened Indian markets further to global trade in line with World Trade Organisation commitments.

Koehler added that reform-led growth would also help the world's biggest democracy more effectively combat the grinding poverty experienced by many of its billion-strong population.

"More growth is needed to find a decisive breakthrough against poverty so I think the commitment for reforms should now be implemented into action on a broad scale," he said.

"I am sure the authorities know about that are ambitious with that," Koehler said.

The government's reform drive has met with hostility from the opposition and some difficulties even among its allies.

The federal government's planned sale of a majority stake in Balco to Sterlite Industries -- keenly watched by foreign investors -- has been stormy, with the chief minister of the opposition Congress-ruled state of Chhattisgarh vehemently opposing the deal.

The government has kicked off the sell-off process for a number of firms this year and strategic assets including monopoly international telephony provider Videsh Sanchar Nigam Ltd and state-run information technology firm CMC Ltd.

In nearly a decade of economic reforms, India has made only one strategic sale, that last year of loss-making bread-maker Modern Foods to consumer products giant Hindustan Lever Ltd, a unit of Anglo-Dutch Unilever Plc.

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