IMF lowers India's growth forecast to 8.2 pc | business | Hindustan Times
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IMF lowers India's growth forecast to 8.2 pc

business Updated: Apr 12, 2011 16:50 IST

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International Monetary Fund (IMF) has lowered India's economic growth rate forecast to 8.2 % for 2011 and warned that boom like conditions could lead to over-heating of the economy.

"The challenge for many emerging and some developing economies (is) to ensure that present boom-like conditions do not develop into overheating over the coming year," the IMF said in its World economic Outlook report.

The multilateral lending agency had earlier projected the country's economy to grow by 8.4 % in 2011.

IMF took note of the high inflation in India, recorded at 8.31 % in February, even as RBI expects it to come down to 8 % by March-end.

"Signs of overheating are starting to materialise in a number of economies. Most of the increase in headline inflation in recent months 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.

Further, it projected the Indian economy to grow at a moderate 7.8 % in 2012 and cautioned that rising commodity prices and disruptions to oil supply could pose new risks to economic recovery.

"Commodity prices have increased more than expected, reflecting a combination of strong demand growth and a number of supply shocks. These increases conjure the spectre of 1970s-style stagflation, but they appear unlikely to derail the recovery," the IMF said.

According to the international multilateral organisation, the inflationary pressure is likely to increase further as high food and energy prices would require an increase in wages.

On global growth trends, IMF said, Asia would outpace other regions on the back of strong export performance,buoyant private domestic demand, besides rapid credit growth.

It said the financial conditions continued to improve after the global crisis, although they remained unusually fragile.

"In many emerging market economies, demand is robust and overheating is a growing policy concern. Developing economies, particularly in sub-Saharan Africa, have also resumed fast and sustainable growth," IMF said.

It added, "Given the improvement in financial markets, buoyant activity in many emerging and developing economies, and growing confidence in advanced economies, economic prospects for 2011–12 are good."

However, it retained its projection for global economic growth at 4.5 % in 2011 and 2012, which is lower than 5 % growth it projected for 2010.