IMF: India to Grow by 8.8 Percent, Inventory Demand Growing

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Apr. 22 – The International Monetary Fund (IMF) says strong domestic demand will support recovery in India when total world output increases by 4.2 percent and its  economy grows by 8.8 percent this year.

The agency has revised its January estimates for India by 1.1 points for 2010 and 0.6 points for 2011 in its just released World Economic Outlook entitled “Rebalancing Growth.” In China, GDP growth is expected to exceed government estimates of 8 percent growth for 2009 and is likely to be near 10 percent both this year and next year. Brazil, China and Indonesia are reporting resilient growth in their economies compared to weak recovery in more developed nations.

Growing domestic demand from India and China will positively affect the rest of the region.  “For economies such as India, which are relatively more closed and which have relied on stimulus to support growth, the main challenge will be to ensure durable fiscal consolidation, including by implementing fiscal and other structural reforms,” the report said. Inventory investment will contribute to economic recovery due to improved demand from emerging economies. Moreover, with improving global trade prospects, stocks must be rebuilt after the drawdown of 2008-09 according to the report.

The agency also added that it “may not be too early to start unwinding the stimulus if output gaps are closing and inflation pressures are beginning to emerge. ” The reports said: “This appears to be the case already for a few economies in the region, including Australia, India, and Malaysia, where authorities have already started tightening monetary policy.”