Monday, June 22, 2009

At 8%, India to grow fastest into '10: World Bank

The World Bank has projected an 8% growth for India during 2010, which will make it the fastest-growing economy for the first time,
overtaking China’s expected 7.7% growth.

The multilateral lender has revised upwards the development rate for the Indian economy this year to 5.1% from an earlier projection of 4%, according to its Global Development Finance Report released on Monday. India has consistently outperformed growth forecasts by the World Bank in the past.

The prospects for the global economy remain ‘unusually uncertain’ despite recent signs of improvement into some parts of the world, the report points out. Barring a few countries, including India and China, the bank has cut 2009 growth projections for all other economies and expects the world economy to contract by 2.9% this year.

"Developing countries are expected to develop by only 1.2% this year, after 8.1% growth in 2007 and 5.9% growth in 2008.

"When China and India be excluded, GDP in the remaining developing countries is projected to fall by 1.6%, causing continued job losses with throwing more people into poverty," the report said.

The report calls on governments around the world to be vigilant when drawing up strategies to reverse the recent expansionary monetary and fiscal policies once the world economy takes off.

The bank has urged rich countries to boost the flow of credit to developing nations to help speed up economic recovery. “Developing countries can become a key driving force during the recovery, assuming their domestic investments rebound with international support, including a resumption in the flow of international credit,” said Justin Lin, chief economist at World Bank.

Despite the gloomy picture for this year, the bank says growth in developing countries, led by India and China, could reach 4.4% into 2010 and 5.7% by 2011.

Since global growth will only return to its full potential by 2011, the gap between actual and potential output, unemployment also disinflationary pressures continue to build, the report adds.

This World Bank report compares with a more upbeat assessment by the International Monetary Fund, which said last week the decline in global output has moderated also it may raise its 2010 growth forecast for the world economy.