IMF raises growth forecast

International Monetary Fund (IMF) has upgraded its forecast of India's gross domestic product (GDP) growth for 2003-04 to 7.5 per cent. Its earlier projection was 7 per cent.

According to sources close to the body, the upgrade is as per the IMF staff projections and will be made a part of the Global Economic Outlook, which will be realised in April 2004.

The revision comes a day after the Report of Currency and Finance was released by the Reserve Bank of India (RBI). In fact, the report has made a specific mention of the fact that going by the IMF projection, India will be one of the fastest growing economies among the emerging markets.

The growth estimate is made at 7 per cent with an upward bias, just below China at 7.5 per cent.

Sources added that the revised growth estimate has been made on the basis of the sound economic fundamentals, continuation of the external sector reforms and capital account convertibility.

According to last quarter projection made by the IMF, the world economy is expected to grow at the rate of 3.2 per cent during 2003 and 4.1 per cent during 2004.

The revision of GDP estimate for India by IMF comes on close heels of National Council of Economics and Applied Research putting out a growth estimate of 8.1 per cent.

However, on the domestic front, inflation remains a cause of concern. As per the RBI report, even if the downward bias could not be attained in inflation, the range of 4-4.5 per cent for inflation indicated in the mid-term review continues to be relevant.

This is because there are three favourable factors which have been cited by the report to counter two factors leading to rise in prices and consequent risen inflation rate.

While two factors leading to rise in inflation are firm international oil prices and rising world primary commodity prices, three benign factors are ample cushions in terms of food stock and forex reserves, resilience shown by Indian economy to absorb shocks through efficient liability management and of course, the base effect of mid-January to March 2004.