India’s Projected GDP Growth Down To 6.4%, Yet Fastest-Growing Major Economy: UN Report

According to a UN report, as the Ukraine conflict has an impact on global GDP, India’s economy is expected to increase by 6.4 percent in 2022, slower than last year’s 8.8 percent but still the fastest-growing major economy, with higher inflationary pressures and unequal labour market restoration stifling private consumption and investment.

In its World Economic Situation and Prospects (WESP) report released on Wednesday, the UN Department of Economic and Social Affairs stated that the war in Ukraine has shaken up the fragile economic expansion from the pandemic, sparking a catastrophic humanitarian crisis in Europe, raising food and commodity prices and intensifying inflationary pressures globally.

The world economy is now expected to increase by only 3.1 percent in 2022, down from an estimate of 4.0 percent in January 2022. According to the report, with high increases in food and energy prices, global inflation is expected to surge to 6.7 percent in 2022, double the average of 2.9 percent between 2010 and 2020.

The outlook for South Asia has deteriorated in recent months, according to the report, due to the ongoing crisis in Ukraine, rising commodity prices, and probable negative economic consequences from US monetary tightening.

In 2022, regional economic output is expected to grow by 5.5 percent, which is 0.4 percentage points less than the January prediction.

“India, the largest economy in the region, is expected to grow by 6.4 per cent in 2022, well below the 8.8 per cent growth in 2021, as higher inflationary pressures and uneven recovery of the labour market will curb private consumption and investment,” it said.

India’s growth rate is expected to reach 6% in fiscal year 2023.

Except for East Asia and South Asia, practically all regions of the world are impacted by high inflation, according to Hamid Rashid, Lead Author and Chief, Global Economic Monitoring Branch, Economic Analysis and Policy Division, United Nations Department of Economic and Social Affairs.

In that sense, he said, “India is a little bit better placed” than other Latin American countries since it did not have to seek extreme monetary tightening.

Brazil has hiked interest rates on several occasions.

India’s anticipated growth rate for 2022 is 6.4 percent, down 0.3 percent from January’s estimate.

“We expect Indian recovery to remain strong in the near term, in the next year and two, but again we cannot completely discount the downside risk that would come from external channels. So that risk is still there,” he said.

Higher prices and shortages of crop inputs, such as fertilisers, are expected to persist in the area, significantly harming Bangladesh, India, Pakistan, and Sri Lanka’s agricultural sectors, according to the report.

“This will probably result in weaker harvests and exert further upward pressures on food prices in the near term,” the report said.

It stated that, in addition to higher energy prices, rising food prices will likely aggravate food insecurity in the region. Inflation in the region is anticipated to increase to 9.5 percent in 2022, up from 8.9 percent in 2021.

Tighter external financial conditions, according to the research, could hurt regional economic prospects, particularly for nations with strong exposure to global capital markets and debt distress or debt default concerns.

“The pandemic left many countries with large fiscal deficits and higher and unsustainable levels of public debt. Sri Lanka is currently facing a debt crisis and discussing a new IMF-supported programme to bring its economy out of the crisis,” it said.

The majority of developed and developing economies, as well as the world’s top economies – the United States, China, and the European Union – have had their growth prospects downgraded, according to the report.

Higher energy and food prices are weighing on development forecasts, particularly in commodity-importing developing nations. The situation is made worse by rising food insecurity, particularly in Africa, according to the report.

Forecasts for growth in the United States, the European Union, and China have all been revised downward, with the European Union seeing the most dramatic reduction. The European Union economy, which has been affected hardest by Russian Federation energy supply interruptions, is now predicted to grow by 2.7 percent in 2022, down from 3.9 percent in January.

The US economy is anticipated to expand by 2.6 percent in 2022 and 1.8 percent the following year, while China’s GDP is expected to expand by 4.5 percent in 2022 and 5.2 percent in 2023. According to the report, developing nations would grow at a rate of 4.1 percent in 2022, down from 6.7 percent in 2021.

“The war in Ukraine – in all its dimensions – is setting in motion a crisis that is also devastating global energy markets, disrupting financial systems and exacerbating extreme vulnerabilities for the developing world,” UN Secretary-General Antonio Guterres said.

“We need quick and decisive action to ensure a steady flow of food and energy in open markets, by lifting export restrictions, allocating surpluses and reserves to those who need them, and addressing food price increases to calm market volatility,” he added.