International Monetary Fund (IMF) has now corroborated what I have been maintaining for quite some time. IMF has upgraded India's GDP forecast of year 2010 from 8.8% to 9.4%. And on the other hand, IMF has indicated that US poses the greatest threat to global recovery. In fact as per IMF it is India and China and some other Asian economies which are supposed to lift the growth prospects in the world and therefore it has raised the world GDP prospects for 2010 from 4.2% to 4.5%. However it has lowered its growth estimates for Euro zone, Canada, US, Japan, and emerging economies.
If we consider expected growth rate of different economies of the world, India ranks second behind China. According to IMF, while India's GDP is expected to grow at the rate of 9.4%, China's GDP is fore estimated to grow at 10.5% for year 2010. This is wonderful news for Indian economy, and should lift the global investors' confidence and investment sentiments towards India.
In case immediate steps to create jobs to boost consumerism are not taken, US will witness a double dip depression. Fundamentally, steps have to be taken to rein in fiscal deficit and follow frugal monetary policies to avoid double dip recession. Technically speaking, chart of Dow Jones is indicating that there will be revisit of levels of 6400 which will be akin to double dip in US stock markets. On the other hand Indian markets will correct with US markets to some extent, but will rebound aggressively to surpass their all time highs in a year's time. That would in essence mean that the process of decoupling has begun. Alongwith India you can also see other emerging economies do well, provided they are not heavily dependent on exports to US.
Countries heavily dependent on US exports have an attendant problem, apart from their own national economic problems in a world going through credit crunch. Since the beginning of this credit crisis in 2008, US has done next to nothing to bolster their jobs market. Unemployment data suggest that more and more people are being shown the pink slip in US. If unemployment and under employment is high then consumption will be low. And if consumption is low then there will be even less production, necessitating even less jobs. Thus goes the vicious cycle of low employment. So in such scenario do you believe that US will increase its import? In fact there will be shrinking of US imports, and that will hurt the countries whose GDP is heavily dependent on exports to US.
In times ahead, Global Investors are going to look at these forecasts from IMF to decide on global destinations to park their money. And India growth story merits serious attention!!
About this Author
An economist with specialization in capital market analysis. The author advises Indian stock market participants through a blog site http://archana-archdeb.blogspot.com
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