India is forecast to grow at 6.5 per cent in fiscal year 2022, a decline from the 8.4 per cent GDP estimate in previous financial year, and while the country’s economic recovery is on a “solid path” amid rapid vaccination progress, coal shortages and high oil prices could put the brakes on economic activity in the near term, the UN said on Thursday.
The flagship United Nations World Economic Situation and Prospects (WESP) 2022 report, launched here, said that India’s GDP is forecast to grow at 6.5 per cent in fiscal year 2022, a contraction from the estimated growth of 8.4 per cent in fiscal year 2021.
Growth is projected to further slow down to 5.9 per cent in the financial year 2023, the report said.
On a calendar year basis, the report says that India’s GDP is projected to expand by 6.7 per cent in 2022 after a 9 per cent expansion in calendar year 2021, as base effects wane.
GDP growth for the country is forecast to slow down to 6.1 per cent in calendar year 2023, the report said.
“India’s economic recovery is on a solid path, amid rapid vaccination progress, less stringent social restrictions and still supportive fiscal and monetary stances,” the report said.
The report noted that for India, robust export growth and public investments underpin economic activity, but high oil prices and coal shortages could put the brakes on economic activity in the near term.
“It will remain crucial to encourage private investment to support inclusive growth beyond the recovery,” it added.
It added that while still vulnerable, India is in a better position to navigate financial turbulence compared to its situation during the “taper tantrum” episode after the 2008-2009 global financial crisis.
This is due to a stronger external position and measures to minimise risks to bank balance sheets. In the medium-term, scarring effects from higher public and private debt or permanent impacts on labour markets could reduce potential growth and prospects for poverty reduction.
In India, inflation is expected to decelerate throughout 2022, continuing a trend observed since the second half of 2021 when relatively restrained food prices compensated for higher oil prices.
A sudden and renewed rise in food inflation, however, due to unpredictable weather, broader supply disruptions and higher agricultural prices, could undermine food security, reduce real incomes and increase hunger across the region.
The report said that the global economic recovery is facing significant headwinds amid new waves of COVID-19 infections, persistent labour market challenges, lingering supply-chain challenges and rising inflationary pressures.
After expanding by 5.5 per cent in 2021, the global output is projected to grow by only 4.0 per cent in 2022 and 3.5 per cent in 2023.
“In this fragile and uneven period of global recovery, the World Economic Situation and Prospects 2022 calls for better targeted and coordinated policy and financial measures at the national and international levels,” UN Secretary-General António Guterres said.
“The time is now to close the inequality gaps within and among countries. If we work in solidarity – as one human family – we can make 2022 a true year of recovery for people and economies alike,” he said.
With the highly transmissible Omicron variant of COVID-19 unleashing new waves of infections, the human and economic toll of the pandemic are projected to increase again.
“Without a coordinated and sustained global approach to contain COVID-19 that includes universal access to vaccines, the pandemic will continue to pose the greatest risk to an inclusive and sustainable recovery of the world economy,” Under-Secretary-General of the United Nations Department of Economic and Social Affairs Liu Zhenmin said.
In India, a deadly wave of infection with the Delta variant stole 240,000 lives between April and June 2021 and disrupted economic recovery.
“Similar episodes could take place in the near term,” the report said.
It also noted the “important step” taken by India to commit to 50 per cent of its energy mix coming from renewable sources by 2030 and to reaching net-zero emissions by 2070.