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Flexible exchange rates useful to manage a booming economy like India, says MD of IMF


In response to question on India's impressive economic growth, Mr Rodrigo de Rato, Managing Director International Monetary Fund said that since India started its reform and liberalization process at the beginning of the decade of the '90s, it has been in the interest of India and it has improved its capacity to integrate itself into the global economy.

Growth has been impressive, 9.6 in 2006, 8.9 in 2007, and we are [projecting it] at 8.4 in 2008. So that's really an impressive growth pattern. With inflation coming up a little bit in 2007, but we think that monetary responses by the Reserve Bank of India have been up a bit. And in that respect the credibility of monetary policy in India is becoming better and stronger, and the steps of liberalizing the financial market in India are probably the steps in the right direction.

We've seen also a flexible movement of its currency, and that has been good for India, and I think it would be a good example for other countries in the region to see that flexible exchange rates can be very useful to manage a booming economy, as is the case of India.

There has been, certainly, a very important step-up of inflows, of capital inflows, which shows that the confidence of investors in India is increasing.

We see the priority continuing with this drive to liberalizing the Indian economy. Certainly, to bridge the major gaps in infrastructure, including power and transportation, the need to strengthen Indian capacity to introduce a labor force into the global market by increasing and stepping up the vocational reforms, and certainly to try to address the very strong certitudes on unskilled labor.

We also see that the need to keep increasing the openness of Indian economy to foreign competition and to foreign investment is in the interest of the Indian society.

(Extracted from transcript of Press Briefing by Mr Rodrigo de Rato, Managing Director International Monetary Fund at Washington, D.C. on October 15, 2007)

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