RBI Governor's Quarterly Review Report on Monetary Policy 2009 - 10
Dr. D. Subba Rao , in his quarterly review report on the monetary policy for the FY 2009-10 states that the global economy has begun to recover from the deep recession set off by the financial crisis. This recovery is underpinned by output expansion in emerging market economies (EMEs), particularly those in Asia . The pace and shape of recovery, however, remain uncertain.
In fact, the global economic outlook presents a mixed picture. On the positive side, world output, as per the International Monetary Fund (IMF) estimates, has expanded by 3 per cent in the second quarter (quarter-on-quarter, annualised), manufacturing activity has picked up, trade is recovering, financial market conditions are improving, and risk appetite is returning.
On the negative side, there are concerns that the recovery is fragile. The second quarter improvement is essentially the outcome of policy-induced stimulus. Going forward, the impact of the stimulus will fade away and inventory rebuilding may lose momentum. In advanced economies, private consumption remains constrained by continuing job losses, sluggish income growth and dented confidence.
Even as output is recovering, unemployment is expected to increase to over 10 per cent in the US and the Euro area. Investment is also expected to remain weak due to ruptured balances sheets, excess capacity and financing constraints. Bank collapses are continuing. World trade remains below its year ago level, notwithstanding recent quarter-on-quarter improvement.