IMF projects India’s growth at 9.7% in 2010

IMF projects India’s growth at 9.7% in 2010

Washington: The International Monetary Fund (IMF) has projected the Indian economy will grow by 9.7 % in 2010 and 8.4 % in the next fiscal, driven by robust industrial production and macro-economic performance.

However, neighbouring China is expected to grow at an even faster rate of 10.5 % in 2010 and 9.6 % in 2011, driven by domestic demand, the IMF said in its latest World Economic Outlook report.

Advanced economies, on the other hand, are projected to grow by just 2.7 % in 2010 and 2.2 % in 2011, the IMF report said, adding that global trade is forecast to expand by 4.8 % in 2010 and 4.2 % in 2011, with a temporary slowdown during the second half of 2010 and the first half of 2011.

“India’s macroeconomic performance has been vigorous, with industrial production at a two-year high. Leading indicators - the production manufacturing index and measures of business and consumer confidence -continue to point up," the IMF said.

“Growth is projected at 9.7 % in 2010 and 8.4 % in 2011, led increasingly by domestic demand. Robust corporate profits and favorable external financing will encourage investment," it said.

“Recent activity (10 % year-over year growth in real GDP at market prices in the second quarter) was driven largely by investment and the contribution from net exports is projected to turn negative in 2011 as the strength in investment further boosts imports," the IMF said.

According to the World Economic Outlook report, growth in emerging Asia economies stands at about 9.5 %, with robust demand from China, India and Indonesia benefiting other Asian economies.

In China, a major fiscal stimulus, a large expansion of credit and a number of specific measures to boost household income and consumption increased domestic demand growth to almost 13 % in 2009, contributing to a large decline in the current account surplus.

The recovery is now well established, and a transition from public stimulus to private-sector-led growth is underway, it said.

Latin America has also recovered strongly, with real GDP growth at about 7 %. The recovery in Latin America is being led by Brazil, where real GDP growth has been close to 10 % since the third quarter of 2009 and the economy is now showing signs of overheating, the report said.

A number of other economies have also returned to solid growth. However, Mexico is lagging behind, partly because of its strong trade linkages with the United States.

Growth in Mexico recently picked up on the back of strengthening exports to the United States, but the output gap remains large.

The World Economic Outlook projects that the output of emerging and developing economies will expand at a rate of 7.1% and 6.4%, respectively, in 2010 and 2011.

“The global recovery remains fragile, because strong policies to foster internal rebalancing of demand from public to private sources and external rebalancing from deficit to surplus economies are not yet in place," it said.