India-Forums.TV

[fiza]

NEW DELHI: The International Monetary Fund is no longer so bullish on India's economic growth. On Monday, it lowered the growth projection for 2011 to 8.2%, as against 10.4% for 2010 when India was projected to be the fastest growing major economy ahead of China's 10.3%. For 2011, India's growth estimate is 140 basis points (100 basis points equal a percentage point) lower than China's 9.6%.

India's growth rate is expected to moderate further to 7.75% in 2012, IMF said in its April 2011 World Economic Outlook. Growth apart, the multilateral agency has also cautioned on the overall economic situation with red lights for several key economic indicators, including inflation and output relative to trend. This means that production was growing faster than the average and inflation was historically high.

with continued rapid growth, inflation is expected to continue increasing this year across much of developing Asia, it said noting inflation pressure is most evident in India. But signs of overheating are starting to materialise in a number of economies, including India, it said while noting that continued high growth has meant that some economies in the region are now operating at or above potential.

Credit growth is accelerating in some economies like Hong Kong, India, and Indonesia, while it remains high in China. Despite some moderation, inflation has become more generalized in India and is projected to remain high - averaging 7.50%. In other parts of developing Asia, inflation is lower but is on the rise.

Most of the increase in headline inflation in recent months in Asia has been due to a spike in food prices, but core inflation has also been increasing in a number of economies, most notably India, IMF said. Besides, it said that capital flows to some larger emerging market economies, including India, Brazil, China, and Indonesia are all within the range of or above pre-crisis levels. In India, credit growth has just begun to increase again, after a boom through much of 2007 was followed by a sharp slowdown during 2008-09.

Many emerging market economies will need to tighten policies to lower the risk of a hard landing, the IMF said suggesting economies like India and Brazil with high public debt should take advantage of strong cyclical conditions to improve their public balance sheets.

[durwinwilson]

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