'India's economic turmoil resulted from neglect of inflation'

WASHINGTON: India's recent economic turmoil is due to a neglect of inflation and budgetary discipline and "serious" fiscal adjustments are needed to fix the problem, a noted Indian economist has said.

"As a result of this domestic instability, India's middle class has been exporting capital in the form of buying gold," Arvind Subramanian, Peterson Institute's Dennis Weatherstone Senior Fellow, said.

Subramanian, in his remarks ahead of the Fall meeting of the IMF and the World Bank, attributed much of India's inflation and currency problems to its growing fiscal deficits combined with easy monetary policy.

Noting that the development model in India is running out of steam, Subramanian said manufacturing was never significant in India.

"Going forward, there has to be serious fiscal adjustment," he said.