Indian growth will carry on despite inflation, says IMF

India looks set to continue with its pattern of strong economic growth over the next two years, according to a report issued by the IMF today.

Led by strong domestic demand—particularly infrastructure investment—the report predicts a 8.8% growth rate for 2010-11 and a further 8% for the following year.

In terms of sustaining this rapid growth, the report highlights the need to maintain reforms to facilitate infrastructure investment, including lowering the cost of doing business and deepening the corporate bond market.

Equally important are the increases in employment opportunities and in disposable income as improving social outcomes are identified as a key pillar in the government’s strategy. (article continues below)

Plans to streamline spending and improve tax efficiency were commended by the executive board of the IMF as a positive commitment to fiscal consolidation.

Despite suffering a nationwide drought last year, a rebound in agriculture is already demonstrating signs of benefiting the wider economy.

Among the risks to the Indian economy outlined in the report are global economic conditions and the possibility of surging capital inflows causing complications in macroeconomic management.