MONEY MATTERS

In spite of the global economic slow down India has shown a growth by 7.5-7.75%. The International Monetary Fund (IMF) has reported that in India, growth was forecast to average 7.5-7.75% during 2011-12. Private consumption will be the leading economic activity that will be driving this growth. But investments will remain low due to the recent corporate sector governance issues and the renewed global uncertainty. The policy makers face a challenge to dampen the rising inflation, which is currently running close to double digits. Despite policy tightening, real interest rates in India were still much lower than pre-crisis averages, and credit growth was still strong. IMF’s assessment on ongoing global recovery suggests that some elements of this bounce had been anticipated while others had not. While the strong cyclical rebound in global industrial production and trade in 2010 was never expected to persist in crisis hit advanced economies, the handover from public to private demand was taking longer than anticipated. There were also more surprises in the form of sovereign debt and banking sector problems in Europe, the disruptions caused by the earthquake and the tsunami in East Japan, the spreading unrest in the Middle East and North Africa region and the related surge in oil prices. The unresolved debt-limit negotiations between the White House and the U.S. Congress, has led to market turmoil and this has exacerbated uncertainty and added to financial strains, feeding back into the real economy.

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