With India projected to grow at 7.8 per cent in 2017-18, a UN expert said cautious macro economic policy, reduced inflation and some structural reforms have helped the country perform relatively well in an environment of global economic slowdown.
The United Nations Economic and Social Survey for Asia and the Pacific-2016 report, released yesterday, said that the Indian economy is projected to expand by 7.6 per cent in 2016-17 and grow further to 7.8 per cent in 2017-18, mainly on the back of domestic consumption demand aided by steady employment and a relatively low inflation.
Economic Affairs Officer in the UN Department of Economic and Social Affairs, Sebastian Vergara told reporters at the launch of the report here that several demographic and structural factors are responsible for India performing in a “relatively very good way” as compared to economic growth in other countries.
“The macro-economic policy in recent years has been cautious, especially in the fiscal side. This has been a positive development to provide a good framework to increase the sentiment of consumers,” Vergara said.
He added that monetary policy has also played an “important role” in reducing inflation in recent years.
“That is also playing a positive role for the Indian economy.”
He however noted that the picture is “mixed” with respect to structural reforms being undertaken in the country.
“In some areas, the Indian government has made important efforts and those efforts are starting to pay off in terms of increase in investment but there are some areas where structural reforms are having some slow progress,” he said.
The report projects inflation for India at 5.2 per cent for the 2016-17 fiscal and 5.6 per cent for the 2017-18 year.
The report said that in South and South-West Asia, India’s economy is gradually gaining growth momentum “amid making steady, albeit uneven, progress” on policy reforms to attract foreign investment and revive stalled infrastructure projects.
“The positive spillovers of stronger growth in India into other major economies in the subregion are, however, small in view of the limited trade and financial interlinkages. Despite a recent increase, the subregion’s economic growth rate remains below its potential,” it said.
For India, “the near-term growth outlook is positive”, with the projected growth being 7.6 per cent in 2016 and 7.8 per cent in 2017, it said.
It said the economic outlook for developing Asia-Pacific economies is broadly stable but is “clouded by uncertainty”.
Economic growth in 2016 and 2017 is forecast to increase marginally to 4.8 per cent and 5 per cent, respectively, from an estimated 4.6 per cent in 2015, as a consequence of macroeconomic risks continues to buffet the region.
“These risks include: a somewhat uncertain outlook for the Chinese economy in the backdrop of a fragile global economic recovery; weak consumption and investment trends in major developing economies in the region; volatility in exchange rates, including that due to low oil prices for commodity exporters; growing private household and corporate debt; and an ambiguous path of interest rate increases being pursued by the United States. These uncertainties are interconnected and thus complicated to manage, it said.
The report projected that inflation is expected to remain low in the region as a whole, reaching a multi-decade low of 3.7 per cent in 2016 compared with 4.1 per cent in 2015.