At a time when fears of a double dip slowdown have been plaguing the markets, the International Monetary Fund’s (IMF) upward revision of its estimates for global growth is a vote of confidence in the prospects for the world economy.

In India, surveys have shown strong growth in services but a deceleration in manufacturing, while exports growth has fallen month-on-month.

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IMF’s forecast of 9.4% growth in 2010 indicates it is confident that growth will be robust. This is particularly true because GDP growth during the March quarter was 8.6%, so growth in the next few quarters will be even higher if the annual average is to be 9.4%.

In fact, IMF forecasts that growth during the December 2010 quarter will be a sizzling 10.3% year-on-year. This is more than its forecast of China’s growth rate of 9.8% during the December quarter, making India’s growth rate during the quarter the highest among all the countries listed by IMF in its update to the World Economic Outlook.

IMF has also revised upwards its forecast for world trade volume in goods and services, which helps allay concerns about India’s exports. Its export growth estimate for 2010 for emerging economies has been revised up by 2.2 percentage points.

Given strong growth, shouldn’t inflation be higher? IMF says inflation is estimated to edge up this year in emerging markets. But its forecast for consumer prices in emerging economies has been increased by a mere 10 basis points. One basis point is a hundredth of a percentage point.

Central banks in these countries can’t afford to take it easy, though. IMF data shows that core inflation continues to accelerate. IMF has also revised upwards its forecast for non-oil commodity prices this year. But low oil prices should provide some relief.

Interestingly, growth in 2011 is expected to moderate. For India, IMF forecasts 8.4% growth for the year and continued deceleration is evident from its forecast of 8% growth for the December quarter of 2011.

The question is: won’t a slowdown in growth in 2011 have an impact on market valuations?

Graphic by Ahmed Raza Khan/Mint

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