Union Finance Minister Jaswant Singh has said the Indian economy is sturdy enough to face any challenge thrown up by the Iraq war.

It is obvious that the Iraq war would pose new challenges before our economy, which is sturdy enough to face them, Singh told reporters on Thursday night.

India considered the United States-led attack on Iraq as "unjustified" because the United Nations should have been allowed to take appropriate course of action if Iraq failed to honour the world body's mandate, he said.

However, the first priority now is to establish peace in the region, he added. Singh said the government is vigilant over the situation.

To queries on terrorism and the recent killing of pandits in Kashmir, Singh said we must not lose our self-confidence and calm and continue our fight against the menace with greater determination.

Rejecting the suggestion that India should go in for a direct action against Pakistan to check cross-border terrorism, he said a strong action by India does not mean a military move.

"We have been successful in making the world community realise Pakistan's involvement in abetting terrorism in India," he added.

Regarding Kelkar Committee report on tax reforms, he said 90 per cent of the recommendations relating to the administrative and indirect taxes had been implemented.

However, consensus is yet to be arrived at on two or three recommendations on direct taxes, he said.