India does not need IMF loan to fix economy, says Kaushik Basu

World Bank chief economist Kaushik Basu has warned that the next year and a half will be tough for India and for the global economy. Speaking exclusively to CNBC-TV18, Basu said capital control measures and import restrictions are unwarranted in the government’s fight to shield the rupee. On Friday, panic gripped the street as key indices saw their biggest intraday fall in two years as theNiftytanked over 230 points even breaking below the 5,500 mark in intra-day trade. STORY CONTINUES BELOW THIS AD The carnage in markets continued this morning with the BSE Sensex and Nifty extending losses in morning trade.At 9:12 am, the BSE Sensex was down 200 points at 18408, while the Nifty broke its April 2013 lows and was down over 70 points at 5440. Basu also said that India does not need to seek a line of credit from the International Monetary Fund (IMF) to help fix the economy. “I don’t think that we are in a situation where there is any need for that,” Basu told reporters after giving a lecture in the Indian capital, when asked whether India should ask the IMF for money. “India has enough foreign exchange reserves, so the question of having to turn to the IMF is not there.” [caption id=“attachment_1042917” align=“alignright” width=“380”] ![Kaushik Basu. Reuters](https://images.firstpost.com/wp-content/uploads/2013/08/kaushik-basu.jpg) Kaushik Basu. Reuters[/caption] The rupee hit a new record low of 62.35 against the US dollar after closing at61.65 on Friday. “Global economy optimism actually, I don’t share for the next year and a half. I will say a year and a half is still going to be a very difficult time for the global economy,” Basu said. Calling the rupee control measures taken by government ’emergency measures’, Basu said, “The risk of going towards a mindset control, frankly, I don’t worry. I feel right from 1991 that mindset on a trend changed. Yes, these are emergency reactions the government has taken as rupee was moving a lot. So I don’t think there is going to be a long term mindset change.” STORY CONTINUES BELOW THIS AD However, Basu believes, with the current account deficit problems and exchange rate problems that India is seeing, it’s always best to use that to work on the export sector, to work on and energise the manufacturing sector. “You respond not by trying to curb imports but use this as a great excuse to do things to facilitate exports. So, I would have liked really greater action on that front rather than controls, but I don’t think there is a risk of long run move in that direction,” he added. Basu also said that the country’s biggest stumbling block on the exports is administrative costs. STORY CONTINUES BELOW THIS AD “We’re doing a little better on exports. But India’s biggest stumbling block on the exports is administrative costs. Make those easier and our manufacturing sector will take off. This situation should be used to look into the governance of the manufacturing sector and there are big gains waiting around the corner for India,” Basu said.

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India does not need IMF loan to fix economy, says Kaushik Basu

Speaking exclusively to CNBC-TV18, Basu said capital control measures and import restrictions are unwarranted in the government’s fight to shield the rupee.

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