Asian neighbours India and China will be the engines of global economic revival with 2009 growth rates of 5.4 per cent and 8.5 per cent respectively, the International Monetary Fund (IMF) said on Thursday.
“The recovery has started. Financial markets are healing,” said IMF chief economist
Olivier Blanchard. “In most countries, growth will be positive for the rest of the year, as well as 2010.”
The rebound in emerging and other developing economies is being led by a resurgence in Asia, most notably in China and India, fuelled by policy stimuli (tax and interest rate concessions given to industry and individuals to spur consumption and investment), IMF said in the latest World Economic Outlook (WEO), released in Istanbul.
Only China, Indonesia, and India escaped a severe recession, it noted.
A country is said to be in recession if its gross domestic product (GDP) contracts for two consecutive quarters.
IMF’s projection of 5.4 per cent growth for India in 2009 appears unlikely. India’s GDP should grow at lower than 5 per cent between July and December for this forecast to be correct — an unlikely scenario given recent trends.
A slew of recent data releases confirmed signs of rising domestic demand in India. Industrial output grew by 6.8 per cent in July.
IMF’s projections are based on consultations held with government officials.
The actual report is released with a lag of few months and, therefore, might not always factor in the latest economic trends. This could explain its low India forecast.
“IMF could revise its forecast, as it usually does, based on latest data,” said Abheek Barua, chief economist, HDFC Bank.