India to grow at 9.50 per cent in 2010: IMF

July 08, 2010 09:36 am | Updated November 28, 2021 09:13 pm IST - Washington/Hong Kong

Workers engaged in a building construction site in Kochi, Kerala. Robust corporate profits and favourable financing conditions are expected to fuel investment in India, the IMF has projected. File photo: K.K. Mustafa

Workers engaged in a building construction site in Kochi, Kerala. Robust corporate profits and favourable financing conditions are expected to fuel investment in India, the IMF has projected. File photo: K.K. Mustafa

India’s growth will accelerate to about 9.50 percent in 2010 as robust corporate profits and favourable financing conditions fuel investment, and then settle to 8.50 percent in 2011, according to International Monetary Fund projections.

Large domestic demand bases in India, China, and Indonesia, which contribute substantially to Asia’s growth, could also provide the region a cushion in the event of external demand shocks, the IMF said Thursday.

As Asia’s strong recovery from the global financial crisis continues, despite renewed tension in global financial markets, world growth is projected at about 4.50 percent in 2010 and 4.25 percent in 2011, according to the July update of IMF’s World Economic Outlook (WEO).

Relative to the April 2010 WEO, this represents an upward revision of about 0.50 percentage point in 2010, reflecting stronger activity during the first half of the year, the IMF said, keeping its forecast for 2011 unchanged.

At the same time, downside risks have risen sharply amid renewed financial turbulence, it said, suggesting that policy efforts in advanced economies should focus on credible fiscal consolidation, notably measures that enhance medium—run growth prospects such as reforms to entitlement and tax systems.

Noting that economic activity in Asia has been sustained by continued buoyancy in exports and strong private domestic demand, the IMF has revised gross domestic product (GDP) growth forecasts for the region upward for 2010, from about 7 percent in the April WEO to about 7.50 percent.

For 2011, when the inventory cycle will have run its full course and the stimulus is withdrawn in several countries, Asia’s GDP growth is expected to settle to a more moderate but also more sustainable rate of about 6.75 percent.

In China, given the strong rebound in exports and resilient domestic demand so far this year, the economy is now forecast to grow by 10.50 percent in 2010, before slowing to about 9.50 percent in 2011, when further measures are taken to slow credit growth and maintain financial stability, the IMF said.

Both Newly Industrialised Asian Economies and Association of South East Asian Nations (ASEAN) economies are expected to grow by about 6.50 percent in 2010 as a result of surging exports and private domestic demand, before moderating to 4.75 percent and 5.50 percent, respectively, in 2011, it said.

In a separate Global Financial Stability Report Update, the Fund noted that despite generally improved economic conditions and a long period of healing after the failure of Lehman Brothers, progress toward global financial stability has recently experienced a setback.

Sovereign risks in parts of the euro area have materialised and spread to the financial sector there, threatening to spill over to other regions and re—establish an adverse feedback loop with the economy, it said.

Further decisive follow—up is needed to the significant national and supranational policy responses that have been taken in order to strengthen confidence in the financial system and ensure continuation of the economic recovery, the IMF said.

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.