The World Bank has projected 8% growth for India in 2010, which will make it the fastest-growing economy and overtaking China’s expected 7.7% growth. The growth rate for the Indian economy this year has been revised upwards to 5.1% from an earlier projection of 4%, according to World Bank’s Global Development Finance Report released on June 22.

Last week, China’s 2009 GDP growth rate was raised to 7.2% from World Bank’s earlier forecast of 6.5% due to the success of the government’s stimulus package. The bank’s forecast is lower than the Chinese government’s target of 8%.

The prospects for the global economy remain ‘unusually uncertain’ despite recent signs of improvement in some parts of the world, the report points out. Barring a few countries, including India and China, the bank has cut 2009 growth projections for all other economies and expects the world economy to contract by 2.9% this year.

“Developing countries are expected to grow by only 1.2% this year, after 8.1% growth in 2007 and 5.9% growth in 2008.

“When China and India are excluded, GDP in the remaining developing countries is projected to fall by 1.6%, causing continued job losses and throwing more people into poverty,” the report said.

The report calls on governments around the world to be vigilant when drawing up strategies to reverse the recent expansionary monetary and fiscal policies once the world economy takes off.

The bank has urged rich countries to boost the flow of credit to developing nations to help speed up economic recovery. “Developing countries can become a key driving force in the recovery, assuming their domestic investments rebound with international support, including a resumption in the flow of international credit,” said Justin Lin, chief economist at World Bank.

Despite the gloomy picture for this year, the bank says growth in developing countries, led by India and China, could reach 4.4% in 2010 and 5.7% by 2011.

Since global growth will only return to its full potential by 2011, the gap between actual and potential output, unemployment and disinflationary pressures continue to build, the report adds.

Source – Economic Times