Thursday, February 10 2005 16:14 Hrs (IST) - World Time -

New Delhi: Today (Feb 10, 2005) proposing radical fiscal reform in the budget, global rating agency Moody's Investor Services and India Inc have warned that 10 per cent economic growth rate will not be attained without reining in the fiscal deficit.

Moody's Vice President Kristin Lindow said that very rapid growth would not be sustainable unless the fiscal situation is stabilised and more financial resources are freed up for social and physical infrastructure.

"The promise of comprehensive tax reforms is therefore very encouraging; we think this would be a very positive step in the right direction. So too is the emphasis on infrastructure development, but we would hope that this would come without sacrificing the goals of Fiscal Responsibility and Budget Management Act (FRBM), which has still to establish its credibility," she said in her reply, questionnaire on the forthcoming Budget.

The Confederation of Indian Industry (CII) said desired level of growth requires a rise in investment level, for which it is essential to convert Government's revenue deficit into surplus as this will add to the domestic savings pool and keep the cost of capital at internationally competitive levels.

"For a zero revenue deficit target, measures have to be taken to widen both the direct and indirect tax base, privatise loss-making PSUs and rationalise Government expenditure," the CII said.

Federation of Indian Chambers of Commerce (FICCI) said that to attain growth rates close to 10 per cent, the investment rates in the economy should go up to 33 per cent.