With the world economy predicted to slow down this year, the International Monetary Fund has forecast that Indian economy will grow at 7.8 per cent in 2008.
WASHINGTON: With the world economy predicted to slow down this year, the International Monetary Fund (IMF) has forecast that Indian economy will grow at 7.8 per cent in 2008.
"Emerging markets and developing countries are expected to continue to grow strongly, albeit at a somewhat slower pace than in 2006," IMF said in its World Economic Outlook (WEO) report said on Wednesday.
In India, rising revenues are expected to lead to a more than 1 per cent of GDP decline in the deficit (to 6.3 per cent of GDP) in FY2007, but with a public debt ratio of 80 per cent of GDP, further consolidation remains a priority.
Inflationary pressures across the region remain generally well contained, although rapid credit growth poses a challenge in a number of countries.
The Economic Outlook points to a global economy that expanded vigorously in 2006, growing by 5.4 per cent while the economy of the United States slowed in the face of headwinds from a sharp downturn in the housing market.
However, decline in oil prices since August have helped to sustain consumer spending.
In India, upward inflationary pressures and rapid credit growth have prompted the Reserve Bank of India to raise policy rates and the cash reserve requirement for banks.
With inflationary pressures still strong, some further tightening is likely to be needed, the Fund has maintained.
Comprehensive spending and revenue reforms, including removal of exemptions to corporate income taxes and excise duties apart from elimination of nonessential subsidies, could help achieve fiscal deficit goals while creating space for priority spending, the IMF said in its report.
The overall risks to the outlook seem less threatening than six months ago but remain weighted on the downside, with concerns increasing about financial risks, the Fund maintained in its 'World Economic Outlook' ahead of this weekend's Spring Meeting of the Fund and the World Bank.
Among emerging markets and developing countries, rapid growth has been led by India and China, it said.
The Fund is making the point that many emerging markets and developing countries face the challenge of maintaining stable macroeconomic and financial conditions in the face of strong foreign exchange inflows.
Exchange rates in several Asian countries have appreciated markedly over the past six months, but China would benefit from a more flexible regime that provides a more secure basis for monetary policy management.
The WEO also made the point that emerging Asia has generally been resilient to a US slowdown.
Activity in emerging Asia continues to expand at a brisk pace, led by very strong growth in both China and India.
In China, real GDP expanded by 10.7 per cent in 2006 on the strength of solid investment and export growth, although the pace of fixed asset investment cooled in the second half of the year in response to monetary policy tightening, it added.
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