IMF lowers India’s growth projection to 7% in 2012

25 Jan 2012 Evaluate

The International Monetary Fund (IMF) in its World Economic Outlook (WEO) has said that the euro area would fall into a mild recession in 2012 after the euro area crisis entered a “perilous new phase” toward the end of last year. This is likely to affect other parts of the world including the emerging and developing economies (EDEs). The report said in 2012-13, growth in EDEs is expected to average 5¾ %, and about ½ percentage point lower than projected in the September 2011 WEO.

The slowdown is expected to be due to the deterioration in the global environment, as well as the slowdown in domestic demand in key emerging economies. However, Asia is still projected to grow most rapidly at 7½ percent on average in 2012-13. Growth projections for India have also been lowered. Indian economy is expected to grow at 7 % this year and 7.3 % in 2013. Both figures are lesser than its September estimates of 7.5% and 8.1% respectively.

The report suggests that in emerging and developing economies, the near-term focus should be on responding to moderating domestic demand and slowing external demand from advanced economies, while dealing with volatile capital flows. Those economies that suffer from both relatively high inflation and public debt, including India and various economies in the Middle East, may need to take a more cautious stance on any policy easing.

On the whole, global output is projected to expand by 3.3% in 2012, substantially lower (-0.7%) than its estimates in the September WEO.