Indian economy is poised to grow by 6.4 per cent during the current year and 6.7 per cent in 2005 but deficient rains are raising concerns about agricultural growth, the International Monetary Fund said in Washington on Wednesday.

The IMF, in its annual World Economic Outlook released in Washington, said current projections for 2005 was 6.7 per cent.

The funding body, however, cautioned India against run-away expenditure without adequate revenue and called for pushing up farm and trade reforms.

The newly-elected United Progressive Alliance, it noted, "intends to effect ambitious fiscal adjustment to balance the current budget by 2009 (targeting annual adjustment of at least 1/3 per cent of GDP in the overall central government balance)".

The government also proposed to increase expenditure in priority areas including health, education and infrastructure, the IMF said, adding while this target path appears broadly appropriate, supporting measures that were recently proposed will take time to be implemented and yield results."

"In view of this uncertainty, expenditure increase should be contingent on progress on the revenue front," it said adding accelerating structural reforms, including agricultural and trade liberalisation remains key to step up potential growth and reduce poverty.

The IMF noted that India's GDP growth stood at 5 per cent in 2002 and 7.2 per cent in 2003.

It said despite adverse conditions, growth in India is being underpinned by global expansion and supportive monetary conditions.

Till now, the benefits of the information technology revolution have come primarily from higher productivity in the IT sector itself and from higher investment.

"However, history suggests that the biggest gains will come from reorganising the production processes to take advantage of new technology, a process that has only just begun -- outsourcing being one example -- and is likely to continue for a considerable period," the IMF report said.

China's rapid growth, which may well be sustained for two decades or more, will also result in a sustained -- although on a smaller scale -- reorganisation of global production, the IMF said adding it will be more so if it is joined by India.

Both these developments suggest the scope for sustained productivity gains, coming most rapidly in those countries that are sufficiently adaptable to take advantage of them.

The IMF urged all countries and regions to play their part in addressing global imbalances.

It said the continued rapid buildup in reserves in Asia, the dependence of the United States on financial inflows from that region, and the uncertainty about how the situation will be resolved remain important sources of potential instability.

The IMF warned that the longer this persists, the more likely the possibility that the situation will be resolved in a disorderly fashion.

On poverty reduction, the IMF said this must remain at the top of the international agenda.

The recent strength of growth in the regions where poverty is most concentrated -- China, India and sub-Saharan Africa -- is welcome, nevertheless, it said adding Africa is still likely to fall well short of the Milennium Development Goal targets.

The IMF observed that net capital flows, though slowing, continued to flow in a large level into Emerging Asia, with China and India being the largest recipients.

It said net private capital flows to emerging Asia are expected to fall by about $18 billion to $80 billion this year due to recapitalisation of two large commercial banks in China.