On the back of strong domestic demand and robust business confidence, the Indian economy is projected to grow at 8.75 per cent in 2010 and 8.5 per cent in 2011. According to the World Economic Outlook report (2010) by the International Monetary Fund (IMF), the Indian growth story will be supported by a resurgence in demand from the working class on the back of resilient business confidence that will result in more investments.
However, China would continue to be ahead of India and was expected to grow at around 10 per cent in 2010 and 2011, the report added.
“Domestic demand will strengthen as the labour market improves, and investment is expected to be boosted by strong profitability, rising business confidence and favourable financing conditions,” it said.
Moreover, the report stated that strong domestic demand in the economies of India and China is expected to have positive spillovers for other Asian economies, particularly exporters of commodities and capital goods. The overall growth of the Asian economy is expected to expand by 4.5 per cent in 2010 and 5 per cent in 2011. The projected growth rates will be a significantly robust compared to a slow growth of 0.25 per cent in 2009 primarily due to adverse global economic conditions.
“This reflects (growth in China and India) not just strong export growth but also a continued boost from inventory cycle and a boost in business investment in response to high capacity utillisation and strong business confidence,” the report adds. These factors are expected to cushion the impact of the expected withdrawal of fiscal stimulus in 2010.
