India's Economy May Expand 9.7% This Year, More Than Forecast, IMF Says

India’s economy may grow faster than previously forecast, helped by consumer demand, the International Monetary Fund said.

The South Asian economy will expand 9.7 percent in 2010, the Washington-based lender said in its World Economic Outlook, more than the 9.4 percent estimated in July. The fund maintained its 2011 prediction for India’s growth at 8.4 percent.

“Low reliance on exports, accommodative policies, and strong capital inflows have supported domestic activity and growth,” the IMF said in the report. “The rapid pace of domestic activity, evidenced by rapidly rising inflation, led the central bank to increase the repo policy rate.”

The Reserve Bank of India has increased its benchmark repurchase rate by 1.25 percentage points this year, the most by any central bank in Asia, to cool price gains. The IMF forecast Indian consumer prices may rise 13.2 percent in 2010 compared with 10.9 percent in 2009.

The Reserve Bank’s repurchase rate is 6 percent and the reverse repurchase rate is 5 percent. The central bank is scheduled to issue its next monetary policy statement on Nov. 2.

Earlier this month, Goldman Sachs Group Inc. increased India’s economic growth forecast to 8.5 percent from 8.2 percent for the financial year ending March 31 and estimated inflation at 6.5 percent by March 31, more than its earlier projection of 6 percent.