Camdessus Sees Scope for India to Achieve Asian "Tiger" Status

• Pages: 77-78

Page 77

IMF Managing Director Michel Camdessus recently concluded a brief visit to India, in the wake of India's announcement of its fiscal budget for 1997/98 and in part to assess the impact of economic reforms launched in 1991. Camdessus issued the following statement to the press on March 5.

I have been impressed by the changes that have taken place in India over the five years since I was last here. Recent growth rates averaging 7 percent, buoyant domestic saving and investment, and the strong external position stand as testimony to the depth and success of the government's reform program. Industrial deregulation has helped create a thriving private sector, while trade liberalization and an opening up to foreign investment have integrated India more full into today's rapidly evolving global economy.

Today, India is at a crucial crossroads. The strong performance of the past few years and the favorable external environment provide a unique opportunity for India to accelerate its growth to the rates seen in the Asian "tigers" and to make major inroads in reducing poverty. But India needs to act now to ensure it, too, reaps the full rewards from the globalization process. As we have seen in the East Asian economies, the potential benefits can be enormous: the expansion of savings to finance critical investment, improved efficiency from greater competition, and the spillovers of technology can all contribute to raise significantly living standards for all of India's population.

India needs to act now to ensure it reaps the full rewards of globalization.

To enable India to move on to a permanently higher growth path, I see two main tasks ahead. The first is to tackle the still-high fiscal deficit, and the second is to launch a second wave of structural reforms. Boldness is needed as the recent slowdown in industrial production and trade illustrates the risks of adopting too-gradual an approach. Let us take these two tasks in turn: consolidation of public sector finances and structural reforms (see also story beginning on page 79).

Page 78

Consolidation of Public Sector Finances

Fiscal consolidation is central to achieving sustained high growth. Fiscal adjustment will help bring down the high interest rates that threaten to choke off growth. It will also further raise the economy's saving rate, which is necessary to finance India's growing investment requirements...