The IMF's World Economic Outlook (WEO), released here today, says that output growth in India slowed from 7-8 per cent in 1994-96 to 5.5 per cent in 1997-98. The slow-down has reflected mainly domestic factors, particularly the stalling of the structural reform process and deterioration in government finances rather than the regional crisis, it says.

But, the Manila-based Asian Development Bank (ADB), in its Asian Development Outlook (ADO), which was released yesterday, forecasts a growth of 6 per cent for India both for this and the next years but without taking into account the political uncertainty created by the fall of the BJP-led government on Saturday.

ADB vice president (east) PeterSullivan, at a special briefing arranged here yesterday on the ADO said the political uncertainty in India was bound to adversely affect the economic process. Both the lending agencies pleaded for gearing up process of economic reforms to put the country-back on the higher growth of over 7 per cent that was obtained during the Narasimha Rao regime.

In case of Pakistan, despite debt relief, a resumption of lending by international financial institutions and the introduction of a large number of structural measures, growth in 1999 is unlikely to exceed 3 per cent largely because of severe import constraints, tightened fiscal policy, a wait-and-see attitude by investors and a poor cotton crop.

A rebound in foreign exchange reserves is allowing a rapid winding down of the trade and payments restrictions introduced during the 1998 crisis, says the IMF.

The IMF says India's medium-term growth prospects continue to be constrained by domestic structural weaknesses. The banking system, though it has not beenadversely affected by contagion effects, in large part due to the limited exposure of Indian banks to exchange rate movements and the economies of the rest of Asia, suffers from significant structural problems which financial reforms is only starting to address, it adds. The IMF document says inadequacies in the government's revenue system, as well as rapid growth in current outlays, including the public sector wage bill and subsidies which will need to be addressed to bring down fiscal deficit that is expected to exceed 9 per cent of GDP in 1998-99.

It says that the 1999-2000 budget for the central government, which was presented in late February, holds the promise of a reduction in the deficit of only about 1/2 (half) per cent of GDP and a more ambitious and front-loaded fiscal adjustment programme continues to be needed.

It calls for reinvigorating the momentum for structural reform, including in the areas of trade policy, the financial sector, and the privatisation of enterprises.

The IMF says Indiais a relatively closed economy--exports comprise only 8 per cent of GDP, with only about 13 per cent exports directed to the rest of asia (excluding Japan)--so that the adverse effect of the crisis on the balance of payments and domestic activity has been relatively modest.