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India growing at 9.4%, says IMF

business Updated: Jul 09, 2010 07:10 IST
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More jobs, higher returns on investment, greater opportunities. This is the implication of the 9.4 per cent growth projection for India during January to December 2010 by the International Monetary Fund (IMF).

This projection is more than double the world’s growth rate of 4.6 per cent.

Higher than the Reserve Bank of India’s 8 per cent and the government’s 8.5 per cent projections, this growth would be buoyed by healthy profits of corporations that go ahead with their expansions to meet rising domestic demand, the IMF said on Thursday.

India’s projection is second only to China’s 10.5 per cent. The Asian duo will lead the global recovery that has been battered by two years of economic crisis, the global lender said in its latest World Economic Outlook.

“The forecasters have upped India’s growth projections, which reflects the economy’s resilience,” said D.K. Joshi, principal economist, CRISIL. “Though the job market may not look up immediately, the high growth will surely act as a magnet for investors.”

But the going is not going to be easy. “While we remain cautiously optimistic about the pace of recovery, there are dangers ahead,” said Olivier Blanchard, the IMF’s chief economist. “How Europe deals with fiscal and financial problems, how advanced countries proceed with fiscal consolidation, and how emerging market countries rebalance their economies, will determine the outcome.”

“In India, growth is expected to accelerate to about 9.4 per cent in 2010, as robust corporate profits and favourable financing conditions fuel investment, and then to settle to about 8.5 per cent in 2011,” the IMF said.

India’s economy grew 7.4 per cent during 2009-10, aided by a sharp rebound in industry and services and a better-than-expected agricultural output.

A slew of recent data releases confirmed IMF’s optimism.

The country’s industrial output grew by 17.6 per cent. Capital goods output have recorded healthy growth in the last few months mirroring rising investment activity.

Consumer durables output have grown by over 30 per cent for the last six months reflecting higher purchase of products such as televisions and refrigerators. Prices, however, remain a key concern.

As inflation rate galloped into double digits — it was 10.16 per cent in May — RBI raised key interest rates to tame prices.