IMF reduces growth forecast

The International Monetary Fund has marginally reduced India's GDP growth forecast for 2007 to 8.9 per cent, from the earlier 9 per cent.

The growth projection for 2008 has been retained at the previous estimate of 8.4 per cent.

However, the IMF has held that India's growth could be higher than its projections. "Growth in India could also be stronger than projected, particularly if robust corporate profits further boost investment spending," IMF said in its latest World Economic Outlook report.

In financial year terms, the IMF sees India's GDP growing at 8.7 per cent in 2007-08 and 8.3 per cent in 2008-09. For financial year 2007-08, the earlier projection was at 8.8 per cent. 
 

THE PREDICTIONS
2007
International Monetary Fund	8.9%
Asian Development Bank	8.5%
United Nations Conference on Trade and Development	8.5%
FY 2007-08
National Council for Applied Economic Research	8.5%
Reserve Bank of India	8.5%
Standard & Poor's	8.6%
International Monetary Fund	8.7%

The IMF has kept its growth projection for the world economy in 2007 unchanged at its previous level of 5.2 per cent. However, the forecast for 2008 has been decreased by 0.4 percentage points to 4.8 per cent.

Growth projection for the United States has been decreased to 1.9 per cent for both 2007 and 2008, a reduction of 0.1 per cent and 0.9 per cent respectively. China's growth for 2007 has been upped in 2007 to 11.5 per cent, while for 2008 its growth projection has been reduced to 10 per cent.

The IMF said that risks to domestic demand growth in emerging market countries like India are modestly on the upper side.

"China and India maintained a strong growth momentum in the first half of 2007, but further upside surprises remain possible. In particular, it remains unclear to what extent policy tightening in both countries will prove effective in cooling robust demand growth that has raised concerns about over-investment (particularly in China) and over-heating (particularly in India)," it held.

On the inflation front, the IMF said that though prices had eased in the recent months, the upside risks remain. "Core inflation is still elevated, credit growth remains rapid and equity prices have risen sharply over the past 12 months," it said. The IMF foresees consumer prices rising at 6.2 per cent in 2007 and 4.4 per cent in 2008.

Finance Minister P Chidambaram had recently said India would achieve 9 per cent GDP growth in 2007-08.