India’s growth will likely ease to just 5.7% in 2022 from 8.2% in the previous year, as economic activity is “being hampered by higher financing costs and weaker public expenditures”, the United Nations Conference on Trade and Development (Unctad) said in its Trade and Development Report 2022 on Monday. The country’s growth will further drop to 4.7% in 2023.
With this, among all the agencies, Unctad has firmed up the most conservative forecast for India (although it’s on a calendar year basis). It’s way lower than Moody’s latest forecast of 7.7% for the calendar year 2022. Various other agencies have projected India’s growth to be in the range of 6.7% to 7.4% in FY23. The RBI last week cut its FY23 real growth forecast for the country by 20 basis points to 7%.
Unctad said, “Going forward, the government has announced plans to increase capital expenditure, especially in the rail and road sector, but in a weakening global economy, policymakers will be under pressure to reduce fiscal imbalances, and this may lead to falling expenditures elsewhere.”
The report predicted China’s economic growth to be 3.9% in 2022, down from 8.1% in 2021. However, it will touch 5.3% in 2023, which means China’s growth with beat India’s in the next calendar year. India, the report said, had recorded real GDP growth of 8.2% in 2021, the strongest among G20 nations. “(But) As supply chain disruptions eased, rising domestic demand turned the current account surplus into a deficit, and growth decelerated,” it said.
The report acknowledged that various PLI schemes is incentivising corporate investment. However, rising import bills for fossil energy are deepening the trade deficit and eroding the import coverage capacity of foreign exchange reserves.