New Delhi: Warning that the combined fiscal deficit of the Centre and States at 10 per cent of GDP (Gross Domestic Product) was "alarmingly high", the International Monetary Fund (IMF) today (Mar 12, 2004) said Indian political leadership should rise to the occasion to control the runaway deficit.

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

"Indian political leadership will have to rise to the occasion to get rid of the huge fiscal deficit," Rajan told the India Today Conclave in New Delhi.

He also said the country lacked the "political will" to move on to the high growth trajectory. He was non-committal if the high eight per cent growth would be sustainable saying the economy was growing on an 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.