Fiscal deficit alarmingly high: IMF

Warning that the combined fiscal deficit of the Centre and states at 10 per cent of the GDP was "alarmingly high", the International Monetary Fund (IMF) today said the political leadership should rise to the occasion to control the runaway deficit.

"There is room for expenditure control, and revenue mobilisation efforts need to be stepped up," IMF Chief Economist Raghuram Rajan said, attributing the huge fiscal deficit to the failure of the government to arrive at a political consensus on reforms.

"The political leadership will have to rise to the occasion to get rid of the huge fiscal deficit," Rajan told the India Today conclave here.

He also said the country lacked the "political will" to move on to the high growth trajectory. He was non-committal on whether the high eight per cent growth would be sustainable saying the economy was growing on average at a slow rate.

Touching upon reforms, he said India needed flexible laws and bankruptcy code to have a proper exit policy.

Giving a four-point agenda to step up the growth rate, Rajan said there should be strong incentives for growth apart from removing infrastructure bottlenecks.

He underlined the need for flexible labour laws and safety net for poor, but welcomed the changing mindset of the people from "chalta hai" economy to "can do economy".

To manage the huge reserves, the government should bring down the tariffs and provide incentives for investments abroad, he said.

Addressing the conclave, Sunil Khilnani of the John Hopkins University said the world was attracted by what Bangalore stood for but was repelled by the happenings in Gujarat.

He said, "There is a dissonance in the image we now project -- on the one hand brand software and on the other, brand saffron."