India set to grow at 8.4 percent in 2011: IMF

WASHINGTON - Essentially predicting no change in its previous estimate of 8.4 percent growth for India in 2011 dipping to eight percent in 2012, the International Monetary Fund (IMF) says the two-speed global recovery will continue.

In advanced economies, activity has moderated less than expected, but growth remains subdued, unemployment is still high, and renewed stresses in the euro area periphery are contributing to downside risks, it said in its latest update of World Economic Outlook (WEO).

In many emerging economies, activity remains buoyant, inflation pressures are emerging, and there are now some signs of overheating, driven in part by strong capital inflows, it said.

Most developing countries, particularly in sub-Saharan Africa, are also growing strongly. Global output is projected to expand by 4.5 percent in 2011, an upward revision of about 0.25 percentage point relative to the October 2010 WEO.

This reflects stronger-than-expected activity in the second half of 2010 as well as new policy initiatives in the United States that will boost activity this year, IMF said. But downside risks to the recovery remain elevated.

The most urgent requirements for robust recovery are comprehensive and rapid actions to overcome sovereign and financial troubles in the euro area and policies to redress fiscal imbalances and to repair and reform financial systems in advanced economies more generally, it said.

These need to be complemented with policies that keep overheating pressures in check and facilitate external rebalancing in key emerging economies, IMF said.

Growth in emerging and developing economies remained robust in the third quarter, buoyed by well-entrenched private demand, still-accommodative policy stances, and resurgent capital inflows, it said.

Activity in the advanced economies is projected to expand by 2.5 percent during 2011-12, which is still sluggish considering the depth of the 2009 recession and insufficient to make a significant dent in high unemployment rates.

Nevertheless, the 2011 growth projection is an upward revision of 0.25 percentage point relative to the October 2010 WEO, mostly due to a new fiscal package passed in late 2010 in the US that is expected to boost economic growth this year by 0.50 percent.

In both 2011 and 2012, growth in emerging and developing economies is expected to remain buoyant at 6.50 percent, a modest slowdown from the 7 percent growth registered last year and broadly unchanged from the October 2010 WEO.

Developing Asia continues to grow most rapidly, but other emerging regions are also expected to continue their strong rebound.

Amid generally sluggish recovery and continued high saving in key emerging Asian economies, real yields are likely to remain low through 2011, IMF said.

(Arun Kumar can be contacted at arun.kumar@ians.in)