Indian economic growth to dip to 7.9 percent: IMF

April 12th, 2008 - 5:03 am ICT by admin  

A file-photo of P. Chidambaram

Washington, April 11 (IANS) Despite resilience, India’s economic growth is expected to dip to 7.9 percent this financial year, mainly because of weaker demand for Indian exports and higher financing costs, the International Monetary Fund (IMF) said Friday. The IMF also revised downwards its January estimate for global growth to 3.7 percent for 2008 from 4.2 percent, adding that China’s growth will shrink more than India’s - by 2.1 percent to 9.3 percent from last year.

“India’s growth is expected to decline by 1.25 percent to 7.9 percent driven by slowdown in investment on tightening credit conditions. Fiscal stimulus will provide a partial offset,” IMF’s report, “Regional Economic Outlook: Asia and Pacific”, said.

The report was released ahead of the April 12-13 IMF-World Bank Spring Meetings here, to be attended by Indian Finance Minister P. Chidambaram.

The IMF report also warned that investment would be more affected than consumption on account of the tight monetary conditions and fall in global economy following the US sub-prime crisis.

“Spare capacity in the economy remains very low, and overheating remains a risk, despite monetary policy tightening,” an IMF spokesperson added at a press conference Friday.

Unlike China, India has little fiscal space to keep up the growth, mainly on account of high public debt, the report said.

The report added that world economies are more correlated now with the US economy than in the early 1990s. India’s correlation is, however, a moderate 0.14 percent, much lower than Japan’s 0.41, but little higher than 0.08 percent of China’s.

On inflation, which has risen by 7.41 percent in India for the week ended March 29, the report stated that the pressure on price rise persists.

Meanwhile, in London, Chidambaram countered IMF forecasts for India’s growth, saying Thursday, “We are confident we can still register a growth rate of over 8 percent.”

This, he said, will keep India in the second spot, after China, among the rapidly growing economies in the world.

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