The International Monetary Fund (IMF) has projected India’s GDP to grow by 6.5% in the fiscal year 2010, on the back of strong domestic demand. During the first quarter to end-June, Indian economy grew by 6.1%, it said.
IMF, in its regional economic outlook for Asia-Pacific, has even suggested that there are upside risks to its growth projections for both this year and the next, given that signs of recovery are broadening and impact of weak monsoon is likely to be muted. The report adds that normalisation of financial market conditions is expected to support a rebound of private investment, sustaining demand even as the fiscal stimulus wanes.
However, the IMF warns that demand growth is also likely to fuel inflationary pressures on the economy. It says that the pickup in core inflation and inflation expectations in India suggest that demand pressures are already playing a role in pushing up inflation. Inflation rose sharply to stand at 1.51% for the week ended 17th October. RBI, in its second quarter monetary policy, has projected inflation to touch the 6.5% mark with upward bias by end of the current fiscal.
The report adds that emerging economies like China and India are rebounding much more quickly than their Western counterparts due to sizable monetary and fiscal stimulus measures.
“The rebound in global risk appetite has underpinned the striking recovery in emerging Asia”, IMF explains. IMF forecasts suggest Asia will grow by 5.75% in 2010, higher than the 1.25% predicted for the G-7 economies. – Sanket Dhanorkar [email protected]