HOW MUCH THE RECOVERY HAS GAINED GROUND is best seen from the fact that the IMF has, once again, raised its forecast for global growth for 2009 as well as 2010. But, as was underlined at the G-20 meet, the recovery is fragile, heavily dependent upon government spending and support — global deficits are up 6 percentage points and governments in advanced economies have provided guarantees of over 30 per cent of their GDP to prevent their banks from collapsing.
Even after that, the IMF estimates another $1.5 trillion of loans will have to be written off by banks by the end of next year, which means bank lending will continue to contract in the OECD even in 2010 — not surprisingly, while lending spreads have come down, they are still way above what they were in the pre-crisis days. While India’s growth remains at a lower level than in the past, the recovery can be seen in IIP, various infrastructure indices, job hiring and even real estate looks less gloomy. With sentiments looking up, India Inc has been quick to raise funds and, despite lower bank credit available, it is not fund-constrained. Investment projects continue to be announced and, if need be, companies are sitting on enough cash so that funds are not a problem.