The world is entering an era of slower growth that will require tighter and more effective oversight of the financial system, warns a new World Bank report issued on Monday, even as it expects the Indian growth rate to swing back to 8% in 2010. The report, ?The Global Development Finance 2009: Charting a Global Recovery? has estimated that global growth will be worse than seen its earlier report of April. While the April report had projected a contraction of 1.3% in global GDP, the Bank now expects a 2.9% contraction in 2009. It also projects a slow recovery, with global GDP growth rebounding to 2% in 2010 and 3.2% by 2011.
The report impacted global stock markets, and the Bombay Stock Exchange?s benchmark Sensex fell by 195.67 points, or 1.4 %, to 14,326.67. Till Monday, the index has climbed 17.7% since the results of the general elections were announced. Prices of safe haven products like government paper and dollar rose.
But the Bank?s conclusion was questioned by deputy chairman of the Planning Commission, Montek Singh Ahluwalia. Speaking to agencies, he said, ?We are hoping we can do about 7 % this year. Everybody now agrees that the worst is behind us and we must focus on reviving the momentum of growth. Last year, our growth rate was about 6.7%.? The Economist Intelligence Unit said in another report, ?India?s real GDP growth (is expected) to average 7.2 % over the next five years.?
The World Bank report notes India?s GDP growth would remain stressed in the short term, initially declining from 6.1% in 2008 to 5.1% in 2009. But India?s prospects will improve significantly with growth touching 8% in 2010 and moving up further to 8.5% in 2011. This would be a substantial recovery as GDP growth in China is expected to recover a bit more slowly to 7.5% in 2010 and then to 8.5% in 2011.