The IMF has projected 8% GDP growth for India in the medium term but said the country would require policies to foster improvements in labour market conditions for better job creation and in the financial sector for sustaining invesment efficiency.The International Monetary Fund (IMF) projection has come at a time when the Planning Commission has proposed 9% Gross Domestic Product (GDP) growth rate in the 11th Plan (2007-2012)."The recent shift to a more investment-led growth pattern, along with strong productivity gains, seem to have raised India's medium-term potential growth to around 8%", an IMF working paper on "Wild or tamed? : India's potential growth" said.Referring to the downside risks, the IMF paper pointed out, "the pace of investment could decline as well, to the extent it is underpinned by cyclical forces."Based on the experiences of the fast-growing Asian economies, the paper said even productivity gains, which are pushing up India's growth, could become volatile, adversely impacting India's growth story.India, it added, would need continued improvement in economic policies to deal with the problems emanating from volatility in productivity gains.It said the country's investment efficiency is at a high level of 35 per cent of GDP over the medium term, comparable to the Asian countries just before the crisis, and maintenance of this rate would need meeting some challenges.
