Economy to grow at 6.3 % in 2004: UN

The Indian economy is expected to grow 6.3 per cent in 2004, according to the Global Economic Outlook 2004 released by the United Nations at its spring meeting of Project Link, a non governmental international research agency, in New York today. The only two economies expected to grow faster than India in 2004 are China at 8.5 per cent and Russia at 7.8 per cent, the report revealed.

Project Link integrates independently developed national econometric models into a global econometric model.

According to the report, the strong pace of global recovery that started in the second half of 2003 was set to continue with the world economy expected to grow by 3.7 per cent in 2004. While Project Link had projected a growth rate of 6.1 per cent for India during 2004 in its April forecast last year, it has revised the growth rate upwards to 6.3 per cent in its latest forecast.

The global economic growth itself has been revised upwards from 3.1 per cent last April to 3.7 per cent now. In 2005, however, Project Link projects the global economy to slow down to 3.4 per cent. India is expected to grow at 6.1 per cent. The growth rates of the Chinese and Russian economies too were expected to slow down to 8.2 per cent and 6.4 per cent, respectively.

"The key challenge for policy makers worldwide is to achieve, to the maximum extent possible, more balanced global growth and, at the same time, to control the downside risks so as to avoid a reversal," Link said in a statement.

The conditions that favoured a buoyant economy included low interest rates, low inflation, rising equity markets and increased demand leading to higher trade and cross-border movement, it added. It further said that foreign direct investmet was expected to rebound in 2004 after several years of downward drift in developing countries. While portfolio investment was already on the rise, improved investor confidence brought the benefits of lower interest rates for countries tapping international capital markets.

A big reason for the increased demand for commodities and energy was the arrival of China as a major factor in the world economy, said Link. China has now become the primary driver of growth for the Asian region, it said, adding that the long-standing notion of the United States as the sole locomotive for global growth was now "complex".