Washington, Apr 25 (IANS): India and China will maintain high growth rates this year and Asia will continue to lead the global recovery despite challenges of inflation and excessive capital flows, IMF officials say.
India and China will grow at the rates of 8.8 and 10 percent respectively.
"By the end of 2009, output in most of Asia returned to pre-crisis levels even in those economies that were hit hardest by the crisis. After the deepest recession in recent history globally, we know that Asia is leading this global recovery," Anoop Singh, International Monetary Fund's Director of the Asia and Pacific Department, told reporters Saturday.
"In fact, activity in Asia has rebounded fairly swiftly over the past year and in the first quarter of 2010."
While the pattern of recovery has varied in Asia, "both the more domestically-oriented economies such as China, India and Indonesia as well as the more export-oriented economies are experiencing strong upturns," Singh added.
Asked if rising inflation in South Asia will pose a serious threat to the region's recovery, Singh said it is not surprising that inflation has begun to turn up as output gaps in much of Asia have begun to narrow.
"We do expect output gaps to close this year in a number of economies including countries in South Asia such as India," he said noting there is a significant contribution to higher inflation coming from food and energy prices.
Reserve Bank of India (RBI) Governor Duvvuri Subbarao represented India at the steering committee of the 186-nation International Monetary Fund (IMF) in place of Finance Minister Pranab Mukherjee.
"Current estimates are that real GDP had grown at 7.2 percent during the just completed fiscal year 2009-10, up from 6.7 percent during 2008-09," he said.
For policy purposes, the RBI has placed the baseline projection of real GDP growth for 2010-11 at 8 percent with an upside bias, he said as the committee held a day-long meeting as part of the regular spring gathering of the IMF and World Bank.
Subbarao said financial crisis played an important role, in both mitigating the adverse impact of the crisis and ensuring rapid recovery.
"The developments on the inflation front, however, are worrisome," he said noting "inflation, which was earlier driven entirely by supply side factors, is now getting increasingly generalised".
In view of the inflation risk, RBI had embarked on a calibrated exit from the expansionary monetary policy, while the central budget of 2010-11 has begun the process of fiscal consolidation by programming reductions in the revenue and fiscal deficits, he said.
Going forward, three major uncertainties cloud the outlook for inflation, Subbarao said. "First, the prospects of the monsoon in 2010-11 are not yet clear. Second, crude prices continue to be volatile. Third, there is evidence of demand side pressures building up."
Noting that problems in the financial sector were at the heart of the recent global crisis, the International Monetary and Financial Committee (IMFC) said in a communiqué that "strengthening financial regulation, supervision, and resilience remains a critical but as yet incomplete task".
"We agree to redouble efforts to forge a collaborative and consistent approach for a stable global financial system that can support the economic recovery."