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  3. IMF cuts Indian economic growth forecast 2012 to 6.1%

IMF cuts Indian economic growth forecast 2012 to 6.1%

17 Sep 2012 Evaluate

The International Monetary Fund (IMF) has cut its projections of 2012 for the Indian economy by 0.7 percentage points to 6.1%, which is the biggest revision made for any country. The Indian economy which had grown by 10.8% in 2010, slowed down to 7.1% in 2011. According to the projections, the impact would be greatest on India’s growth on account of slowdown.

IMF in its latest World Economic Outlook (WEO) has pointed out that no country will be able to come out unaffected by the continuing global turmoil and expects the Indian economy to grow by 6.1% in 2012 and 6.5% in 2013, citing that the impact of several uncertain conditions will be seen in the year 2013 as well. With respect to the fourth quarter, the Indian economy will continue to grow by 6.4% in both 2012 and 2013, which will be a slight improvement of the 6.2% figure in Q4 2011.

IMF has also revised the projections of other emerging countries like Brazil and China. Weak external environment, declining domestic demand have resulted in this downward revision of growth estimates. Moreover, increasing risk aversion and perceived growth uncertainty have resulted into dipping equity prices and capital outflows which further resulted in currency depreciation. IMF revised the projection for the Emerging and Developing Markets to be down by 0.1 percentage points to 5.6% in 2012 and will grow by 5.9% in 2013.

The outlook for the Euro-zone also looks weak. Even though the IMF has maintained its previous projection for 2012 which was to be down by 0.3 percentage points, the IMF has revised its projection for 2013 downward by 0.2 percentage points to 0.7%, pointing out that the worst may be yet to come. The US economy is also likely to face the heat from the global crisis when the IMF slashed the projections for its economy by 0.1 percentage points in both the years 2012 and 2013 to 2% and 2.3% respectively. For the global economic growth for 2012, IMF has left its previous projection unchanged at 3.5% but the growth rate for the same has been revised down by 0.2 percentage points to 3.9%.

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