IMF in its update to the World Economic Outlook (WEO) also said the global growth is expected to reach 3.5 per cent this year, higher than the estimated 3.2 per cent. For China, the IMF report has projected a growth rate of 7.8 per cent in 2012, 8.2 per cent in 2013 and 8.5 per cent in 2014.

In 2011, China had achieved a growth rate of 9.3 per cent while India grew by 7.9 per cent in the same year. "Growth in emerging market and developing economies is on track to build to 5.5 per cent in 2013. Nevertheless, growth is not projected to rebound to the high rates recorded in 2010-11. "Supportive policies have underpinned much of the recent acceleration in activity in many economies," the IMF said. "But weakness in advanced economies will weigh on external demand, as well as on the terms of trade of commodity exporters, given the assumption of lower commodity prices in 2013 in this Update," it said.

IMF said the space for further policy easing has diminished, while supply bottlenecks and policy uncertainty have hampered growth in some economies for example, Brazil and
India.

Observing that economic conditions improved modestly in the third quarter of 2012, with global growth increasing to about three per cent, the IMF report said the main sources of acceleration were emerging market economies, where activity picked up broadly as expected, and the United States, where growth surprised on the upside.

Global financial conditions improved further in the fourth quarter of 2012, the IMF said. However, a broad set of indicators for global industrial production and trade suggest that global growth did not strengthen further.

Growth in the United States is forecast to average two per cent in 2013, rising above trend in the second half of the year, the IMF said. In the United States, the priority is to avoid excessive fiscal consolidation in the short term, promptly raise the debt ceiling, and agree on a credible medium-term fiscal consolidation plan, focused on entitlement and tax reform, it said.

In China, IMF report said ensuring sustained rapid growth requires continued progress with market-oriented structural reforms and re-balancing of the economy more toward private consumption. In other emerging market and developing economies, requirements differ, it said. The euro area, it said, continues to pose a large downside risk to the global outlook.

In particular, risks of prolonged stagnation in the euro area as a whole will rise if the momentum for reform is not maintained. "Adjustment efforts in the periphery countries need to be sustained and must be supported by the centre, including through full deployment of European firewalls, utilisation of the flexibility offered by the Fiscal Compact, and further steps toward full banking union and greater fiscal integration," the report said.

PTI