IMF today projected that Indian economic growth rate would slip to 7.9 per cent in 2008 from 9.2 per cent in the previous year owing to the global turmoil. In 2009, the Indian economy will expand at slightly higher rate of 8 per cent, stated IMF’s World Economic Outlook. In case of China, the GDP growth rate is expected to slip to 9.3 per cent from 11.4 per cent in 2007.

The report further said weak export demand and higher financing costs will dampen the growth of private investment, the key driver of growth.

The impact of global financial turmoil following US sub-prime crisis, the cost of which is estimated at one trillion dollars by the IMF, will be less in case of emerging economies in the East as compared to developed nations.

Growth in consumer prices, which has been rising alarmingly in the recent past, in India is expected to moderate to 5.2 per cent in 2008 and four per cent in 2009. It was 6.4 per cent in 2007.

IMF growth projections for India are in line with other think tanks, including the Prime Minister’s Economic Advisory Council that expected the economic growth rate to moderate to 8.5 per cent during 2008-09 against projections of 8.7 per cent for the previous fiscal.

Taking up the much discussed issue of “Can Emerging and Developing Economies Decouple?” the IMF noted that “in strong contrast to earlier periods of global financial disruption, the direct spillovers to emerging and developing economies have been largely contained so far.” It also said the developing countries had enjoyed strong growth momentum from integration into the global economy and more stability as they reformed their policy frameworks.

The question now is will they “effectively decouple from the substantial slowdown and possible recession in the advanced economies in 2008?”