Finance
According to the United Nations, India will be the fastest-growing major economy this fiscal year, with economic growth forecast at 6.4%.
“We expect Indian recovery to remain strong in the near term over the next year and two,” Hamid Rashid, chief of the United Nations’ Global Economic Monitoring Branch, said on Wednesday at the release of the World Economic Situation and Prospects (WESP) mid-year report.
According to the report, India’s growth rate contrasts with the global growth rate, which is expected to be 3.1% this year and next.
According to the WESP, its gross domestic product (GDP), the overall indicator of the economy, is expected to fall to 6% in the next fiscal year.
According to the report, India’s economy grew by 8.8 percent last fiscal year, slightly less than the January forecast of 9%.
It attributed the lower growth projections for 2022-23 to “higher inflationary pressures and uneven labour market recovery (that) will curb private consumption and investment.”
Because of the global turbulence caused by the Ukraine conflict, the forecast for the current fiscal year has been reduced by 0.3% since January.
“The war in Ukraine has upended a fragile economic recovery from the (Covid) pandemic (and) global economic prospects have changed dramatically since our last forecast in January when we were expecting 4% growth in 2022,” said Shantanu Mukherjee, director of Economic Policy and Analysis.
He stated that the “deterioration in growth prospects is widespread,” affecting the world’s largest economies, including the United States, the European Union, China, and many developing countries.
China, the world’s second-fastest growing large economy, is expected to grow by 4.5% this year and 5.2% next year.
The United States is expected to grow by 2.6 percent this year and 1.8 percent the following year.
When asked about India’s better economic performance and prospects in comparison to the other major economies, Rashid attributed it to lower inflation, which does not necessitate as much monetary tightening as many of the other countries.
“Almost all the regions in the world record high inflation except for East Asia and South Asia,” he said.
“So India is in that sense, is in a little better position in that they don’t have to aggressively pursue monetary tightening” like some other countries, he said.
But Rashid also added a note of caution: “We can’t completely discount the downside risk from external channels, so that that risk is still there.”
For the South Asia region, the WESP projected growth to be 5.5 per cent this year – 0.4 per cent lower than the January forecast.
“The outlook in South Asia has deteriorated in recent months, against the backdrop of ongoing conflict in Ukraine, higher commodity prices and potential negative spillover effects from monetary tightening in the United States,” the report said.
South Asian countries faced risks from higher prices and shortages of farming inputs including fertilisers, it said.
“This will probably result in weaker harvests and exert further upward pressures on food prices in the near term”, according to the WESP.
It added: “Consumer price inflation in the region is expected to accelerate to 9.5 per cent in 2022, from 8.9 per cent in 2021.”
The projections for India made by the UN are lower than those made by the International Monetary Fund (IMF) and the World Bank (WB) last month, before the full impact of the Ukraine war was felt.
The IMF predicted 8.2% growth, while the World Bank predicted 8%.
Source:STN
