IMF revises growth projection upwards

India’s growth projection raised to 5.4% for '09

The International Monetary Fund (IMF) has revised upwards India’s growth projection by 0.9 percentage point in calendar 2009 and 2010 because of positive impact from fiscal and monetary stimulus packages.

The multilateral financial institution now expects Asia’s third largest economy to grow at 5.4 per cent in calendar 2009, compared with 4.5 per cent projected in April this year.

In 2010, the Indian economy is expected to grow at a much faster rate of 6.5 per cent.

China’s growth projection was also revised upwards by 1 percentage point in calendar 2009 and 2010. India’s northern neighbour is expected to register 8.5 per cent growth in 2010. “Growth projections in emerging Asia have been revised upward to 5.5 per cent in 2009 and 7 per cent in 2010. The upgrade owes to improved prospects in China and India, in part reflecting substantial macroeconomic stimulus; and a faster than-expected turnaround in capital flows,” said IMF in its latest World Economic Outlook.

However, the outlook warned that further acceleration in growth would depend on recovery in advanced economies. “The recent acceleration in growth is likely to peter out unless there is a recovery in advanced economies,” IMF said.

Recently, the Economic survey for 2008-09 projected Indian economy to expand by 7 per cent with a range of 0.75 percentage point on either side.

The higher growth is dependent on the US economy recovering by September this year. The IMF projects US economy to contract by 2.6 per cent in 2009 before recovering to 0.8 per cent in next calendar.

“In the US, high-frequency indicators point to a diminishing rate of deterioration, including in the labour and housing markets. Industrial production may be close to bottoming out; the inventory cycle is turning; and business and consumer confidence has improved,” the report said.

Thus, the IMF expects the world’s largest economy to stabilise in the second half of calendar 2009, followed by “gradual recovery” in the following year.