New Delhi: The International Monetary Fund (IMF) on Thursday raised its India growth forecast for 2010 to 9.4 per cent from 8.8 per cent estimated in April.
In its July update of the World Economic Outlook (WEO) projections, the Washington-based multilateral agency, however, kept unchanged its 2011 India growth forecast at 8.4 per cent.
In a report released today, the IMF said that India's GDP growth is expected to accelerate to 9.4 per cent in 2010 as robust corporate profits and favourable financing conditions fuel investments.
The Government expects the country's economic growth to be over 8.5 per cent in 2010-11 (April-March). The growth forecast made by IMF and the Indian government are strictly not comparable, as they count different months for arriving at an annual period.
While IMF forecast is for the calendar year 2010, the Government makes its growth projection for fiscal year (April-March).
Reacting to the IMF's India GDP growth forecast upgrade, Mr T.C.A. Anant, Chief Statistician of India, told Business Line that this was a positive signal and reflected their confidence in the economic growth outlook for India in the near term.
“IMF is an independent body monitoring India. It is a positive signal. If there are similar signals and confirmation from other agencies (monitoring the Indian economy), it will give greater confidence to us about the Government's own assessment of the growth prospects for the year,” Mr Anant said.
Meanwhile, in the July update, the IMF has raised its global growth forecast for 2010 to 4.5 per cent from its earlier estimate of 4 per cent in the April 2010 WEO, reflecting stronger activity in the first half of 2010 (January-June).
The IMF said that the higher growth was on expectations of a modest but steady recovery in most advanced economies and strong growth in many developing and emerging economies.
At the same time, IMF has noted that downside risks have risen sharply amid renewed financial turbulence.
IMF expects the Chinese economy to grow by 10.5 per cent in 2010. It also said that the first quarter GDP numbers in Asia were generally stronger than anticipated at the time of the April 2010 WEO and high frequency indicators suggest that economic activity remained brisk during the second quarter.
The GDP growth forecast for Asia has been revised upwards to about 7.5 per cent from about 7 per cent in the April WEO.
Dr Pronab Sen, Principal Advisor, Planning Commission said that he was not surprised by the IMF move to raise India GDP growth forecast to 9.4 per cent.
“It is not a surprise. It was on expected lines given that we had a strong GDP performance in January-March 2010 (Q1 for IMF's calculation) and will also have good one in April-June (Q2 for IMF's calculation) due to base effect,” Dr Sen told Business Line.
He highlighted that the January-March quarter had the highest weightage in GDP calculation. There was also stronger than expected growth performance in that quarter. “The fourth quarter (January-March) is usually the best quarter for us,” Dr Sen said.
When IMF came up with its initial forecast in April, it was unlikely that they would have factored the actual numbers for January-March 2010.
“Since now they are getting a better idea of the performance in the two quarters — January-March and April-June — which are high growth-cum-high weightage periods, they have pushed up the growth forecast,” Dr Sen said.
Dr Sen maintained that there was still a question mark over sustainability of investments even as many positive indications had emerged in the recent months.
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