Asia continues to lead the world economy’s recovery from the recession of 2008 and India is projected to grow at 8.25 % in 2011, slowing down to 7.75 % in 2012, according to the IMF World Economic Outlook released Monday.
The one big worry for the booming Asian economies is inflation. Food inflation is already high, “but core inflation has also been increasing in a number of economies, most notably India”.
The IMF projection is lower than the 9 % growth projections by the finance ministry and the prime minister’s economic advisory council, but in line with 8.2% announced by the Asian Development Bank last week.
The report does not assign a reason for the growth rate “moderating’ to 7.75% in 2012 saying only that despite the drop India will continue to grow “above the trend”.
And here is why: “Infrastructure will remain a key contributor to growth, and corporate investment is expected to accelerate as capacity constraints start to bind and funding conditions remain supportive,” the report said.
But the report also warned of overheating in some of the Asian economies. “Continued high growth has meant that some economies in the region are now operating at or above potential,” said the IMF.
Growth in the US and Europe – which were at the epicenter of the 2008 recession – recovery seems to be happening but it is sluggish. And the rate of job-creation has been disappointingly inadequate.
“Job creation has recently accelerated, but the pace of improvement in the labor market remains disappointing considering the size of the job losses during the decline.”The US shed over 8.5 million jobs in 2008, and has created 1.5 million since the recovery started. Unemployment remains high at 8.8%, though it has been coming down steadily for some months now.
For Europe the Fund said, “The recovery is proceeding … (although) overall, real activity in the region remains below its potential level and unemployment is still high. There is, however, substantial variation across economies.”