The International Monetary Fund (IMF) expects the Indian economy to grow by 8 per cent during 2010-11, though high inflation and rising fiscal deficit would continue to remain areas of concern.
“With India’s long-term prospects remaining strong and private sector balance sheets sound, we expect growth to be back at potential in 2010-11 even if advance economies grow below trend,” IMF said in its latest paper issued after consultation with Indian authorities.
The Fund, however, forecasts a moderately lower growth rate for the 2011-12 fiscal at 7.7 percent.
For the current fiscal, the fund said the economy would grow by 6.7 per cent, much lower than the 7.2 per cent projected by the Central Statistical Organisation.
The major areas of concern, according to IMF, are the rising inflation and high fiscal deficit. “On the downside, the main risks are elevated inflation and financing constraints...arising from the fiscal deficit, which could stall the recovery,” the paper said.
Wholesale price inflation was at 9.89 per cent in February, much higher than the Reserve Bank’s March-end projection of 8.5 per cent.
Besides, IMF added, the other risks include asset price bubble and the possibility of a sudden stoppage of foreign capital inflows caused by turmoil in global financial markets.
In the Economic Survey, finance minister Pranab Mukherjee projected GDP growth of up to 8.75 per cent in the next fiscal, driven mainly by a robust domestic demand and recovery in the global economy.