The International Monetary Fund (IMF) has forecast the Indian economy to grow at 8.4 per cent in 2011, at the second-fastest rate among emerging markets, behind China's 9.6 per cent, according to its World Economic Outlook (WEO) update released Tuesday.
The latest IMF projections remain unchanged for the world's two fastest-growing economies over its previous October 2010 forecast, and anticipate the growth to continue at 8 per cent and 9.5 per cent respectively for India and neighbouring China in 2012.
The key downside risks in the emerging markets include overheating of the economy with resurgent capital inflows and rapidly rising inflation. Emerging markets currently account for almost 40 per cent of global consumption, the IMF said.
Overall, the global economy is expected to expand by about 4.5 per cent in 2011, slightly up from the earlier estimate of 4.25 per cent, after registering a 5-per cent growth in 2010. The upward revision is primarily because of stronger-than-expected activity in the second half of 2010 as well as new policy initiatives in the US that will boost activity this year.
The IMF said that the world is in a two-speed economic recovery, with advanced economies still recovering slowly, and emerging markets and even some low-income countries relatively buoyant.
''Although the world is on a recovery path from the global economic crisis, action is still needed to address key constraints in the international economy and financial system, including high unemployment and banking problems in advanced economies and risks of overheating in emerging markets,'' the IMF said.