Thaindian News

By Arun Kumar
Washington, Jan 26 (IANS) With the global recovery off to a stronger start, Indian economy is projected to grow at 7.7 percent in 2010, 1.3 percentage points higher than forecast earlier, the International Monetary Fund (IMF) said Tuesday.

India, that recorded a growth rate of 7.3 percent in 2008, dipping down to an estimated 5.9 percent in 2009, is projected to grow at a still marginally higher 7.8 percent in 2011, up 0.5 percentage points from last year’s forecast, the IMF said in an update of World Economic Outlook (WEO).

Noting that the recovery is proceeding at different speeds in the various regions, IMF said world output is expected to rise by 4 percent in 2010, representing an upward revision of .75 percentage point from the October 2009 WEO.

Following the deepest global downturn in recent history, economic growth solidified and broadened to advanced economies in the second half of 2009, it said.

In most advanced economies, the recovery is expected to remain sluggish by past standards, whereas in many emerging and developing economies, activity is expected to be relatively vigorous, largely driven by buoyant internal demand, the WEO said.

IMF suggested that policies need to foster a rebalancing of global demand, remaining supportive where recoveries are not yet well sustained.

Real activity is rebounding, supported by extraordinary policy stimulus Global production and trade bounced back in the second half of 2009, the WEO said noting, “confidence rebounded strongly on both the financial and real fronts, as extraordinary policy support forestalled another Great Depression.”

In advanced economies, the beginning of a turn in the inventory cycle and the unexpected strength in US consumption contributed to positive developments. Final domestic demand was very strong in key emerging and developing economies, although the turn in the inventory cycle and the normalisation of global trade also played an important role.

Driving the global rebound was the extraordinary amount of policy stimulus. Monetary policy has been highly expansionary, with interest rates down to record lows in most advanced and in many emerging economies, while central bank balance sheets expanded to unprecedented levels in key advanced economies, the WEO said.

Output in the advanced economies is now expected to expand by 2 percent in 2010, following a sharp decline in output in 2009. The new forecast reflects an upward revision of 0.75 percentage point.

In 2011, growth is projected to edge up further to 2.5 percent. In spite of the revision, the recovery in advanced economies is still expected to be weak by historical standards, with real output remaining below its pre-crisis level until late 2011.

Moreover, high unemployment rates and public debt, as well as not-fully-healed financial systems, and in some countries, weak household balance sheets are presenting further challenges to the recovery in these economies.

Growth in emerging and developing economies is expected to rise to about 6 percent in 2010, following a modest 2 percent in 2009. The new projection reflects an upward revision of almost 1 percentage point.

In 2011, output is projected to accelerate further. Stronger economic frameworks and swift policy responses have helped many emerging economies to cushion the impact of the unprecedented external shock and quickly re-attract capital flows, the IMF said.

(Arun Kumar can be contacted at arun.kumar@ians.in)