India set to grow faster in 2010: IMF

Washington, Oct 29

As Asia rebounds rapidly from the depth of the global crisis,
India's growth is expected to accelerate to 6.5 percent in 2010
from 5.33 percent in 2009 on the back of strong domestic demand,
the International Monetary Fund (IMF) said.


"In particular, the normalisation of financial market conditions
is expected to support a rebound of private investment, sustaining
demand even as the fiscal stimulus wanes," it said in the latest
Regional Economic Outlook (REO) for Asia and the Pacific,
released in Seoul Thursday.


Noting that there will continue to be significant differences in
growth patterns within the region, IMF forecast Asia's growth
as a whole to accelerate to 5.75 percent in 2010 from 2.75 percent
in 2009, both higher than previously projected.


"The primary driver of Asia's recovery has been a progressive
return towards normalcy following the abrupt collapse in global
trade and finance at the end of 2008," the report said.


"Just as the US downturn triggered an outsized fall in Asia's
GDP because international trade and finance froze, now their
normalisation is generating an outsized Asian upturn."

This development confirms that Asia has not decoupled from
the rest of the world, the REO noted.


Noting that global conditions are expected to continue to
improve gradually in 2010, the report forecasts that output
in the large G7 economies would grow by 1.25 percent next
year, recouping only half the contraction estimated for 2009,
because private demand in these countries remains constrained
by the legacy of the crisis.


Consequently, overseas demand for Asia's products will
remain subdued, keeping the region's growth well below
the 6.66 percent average recorded over the past decade, it said.

By contrast, emerging Asia, in particular China and India, are
rebounding much more quickly. Sizable monetary and fiscal
stimulus and the rebound in global risk appetite have underpinned
the striking recovery in emerging Asia, the REO said.


With Asia's economic landscape changing significantly since the
May 2009, Australia and the three economies with larger domestic
markets in emerging Asia - namely, China, India, and Indonesia -
experienced smaller downturns and are now returning to their earlier,
relatively high growth rates, the report said.

In some countries, such as China and India, fiscal and monetary
stimulus has supported continued growth in total fixed investment.

Inflation should remain generally subdued, the report said,
"but a pickup in core inflation and inflation expectations suggest
that demand pressures are already playing a role in pushing up
inflation in India."

"At the same time, an upside risk to the nearterm outlook is a
more rapid improvement in financial conditions, both abroad
and in the region."

"In particular, in India, there are upside risks to growth projections
for both this year and the next as signs of recovery are broadening
and the adverse impact of the monsoon is likely to be smaller
than anticipated," the REO said.

In a few special cases, however, the recovery is advancing so
rapidly that output gaps are already starting to close and pressures
are already emerging, it said noting, "In India, for example industrial
production is recovering rapidly, and core inflation and inflation
expectations are rising."