The International Monetary Fund (IMF) today revised its growth projection for India in 2010 to 9.5 per cent. It said the Indian growth story during the year would be driven by favourable financing conditions and robust corporate profits.
In April, IMF had projected that India would grow at 8.8 per cent to be the second fastest growing economy in the world after China in 2010. The biggest upward revisions to growth were in developing economies. Brazil’s growth forecast saw the highest revision of 1.6 percentage points to 7.1 per cent in 2010. China’s growth forecast saw a marginal revision to 10.5 per cent, from an earlier projection of 10 per cent.
“In India, growth is expected to accelerate to about 9.5 per cent in 2010, as robust corporate profits and favourable financing conditions fuel investment, and then to settle to 8.5 per cent in 2011,” IMF said in an update of its World Economic Outlook.
Top Indian policymakers like Prime Minister Manmohan Singh, Finance Minister Pranab Mukherjee and the Planning commission have said the country’s economy will expand at 8.5 per cent by the end of the current financial year, compared to 7.4 per cent in 2009-10.
According to IMF, the world economy expanded at an annual rate of over 5 per cent during the first quarter of 2010, primarily driven by the growth in Asian economies.
“World growth is projected at about 4.5 per cent in 2010 and 4.25 per cent in 2011,” the report said.
The lender noted that Asia’s strong recovery from the global financial crisis continued in the first half of 2010, despite a renewed tension in global financial markets.
“GDP growth forecasts for Asia have been revised upward for 2010, from about 7 per cent in the April WEO (World Economic Outlook) to about 7.5 per cent,” it added.
Meanwhile, IMF warned that despite the stronger-than-expected first half recovery, uncertainties surrounding sovereign risks could hamper the economic outlook.
IMF Chief Economist Olivier Blanchard pointed out that downside risks for the global economy had risen sharply.
“While we remain cautiously optimistic about the pace of recovery, there are clearly dangers ahead.... Outcome will be decided based on how Europe deals with fiscal problems, how advanced countries proceed with fiscal consolidation and how emerging markets rebalance their economies,” Blanchard said.
