Macroeconomics  |  October 09, 2012 10:05:00

IMF significantly reduce India's GDP growth estimate, drop estimates for global development this year and next

IMF (International Monetary Fund) today published a report according to which the world economy in the near future just continue to weaken. How long will the trend of weakening economic growth still continues, it mainly depends on how cleverly American and European leaders cope with the current economic challenges.

The IMF expects the global economy in 2012, catching up only about 3.3 percent in June while still expecting 3.5 percent growth. Its global economic outlook also fell in 2013, from 3.9 percent to 3.6 percent.

The fastest growing economies in the developed world in 2012 with 2.2 percent growth in the U.S. economy. Europe will not increase, but decrease by 0.4 percent, and developing countries will strengthen by 5.3 percent. A huge surprise was also a dramatic reduction in the estimate of economic growth in some developing countries such as Brazil and India.

Weaker global economic activity is also based on a positive scenario, economic and political developments in the U.S. and Europe. He assumes that the euro will survive, and that Americans will not hit the air hanging fiscal abyss. If not, the scenario for the future will be much worse.

Breathtaking part of yesterday's report, the IMF was to reduce the estimated GDP growth of South Asian economies, especially India, which is the third largest economy in Asia. Estimate of economic growth for this year fell from 6.1 percent to 4.9 percent. The main reason for such a huge drop in orders per cent of the decline in foreign investment.

GDP second most populous country in the world recently dropped below the critical limit of 5 percent in 2008, which shook the world financial crisis. Subsequently, India, but luckily managed to quickly restore economic activity and for the last three years achieved an average annual GDP growth of 8.2 percent. GDP growth below 5 percent for this state is frightening, but real forecasts.

Negative economic outlook India also supported by the fact that neither the local government nor the central bank does not have any aces up his sleeve, which could stimulate the economy losing breath. Fiscal instruments exhausted state debt and monetary expansion prevents inflation.

The Government of South Asian countries to realize the seriousness of this situation and presents proposals to reduce state debt and foreign investment. The game is to reduce fuel subsidies, fuel and opening the domestic market abroad, in sectors such as aviation and television broadcasting.

In addition, the Minister of Finance on Monday confirmed that it plans to introduce a new financial plan for the next 5 years.

It is certainly positive that India does not sleep on our laurels and strive for reforms that could re-start its economic growth. To what extent will be effective and timely, however, remains a question. Anyway, the IMF estimates for 2013 GDP growth to return to 6 percent.

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